Nearly two years after announcing plans to close, Macy's Union Square flagship has landed a development partner instead of a buyer—and that might just be the best news Union Square has heard in years.
The iconic department store, which spans more than 600,000 square feet fronting Geary Street between Powell and Stockton, announced Tuesday that it's entered into a joint venture with TMG Partners to explore redevelopment options. The store will remain open indefinitely while the developer studies potential new uses for the property, according to San Francisco Chronicle.
"We are wildly excited," said Michael Covarrubias, TMG Partners' chairman and CEO, who has spent four decades developing Bay Area real estate. According to the Chronicle, he hinted strongly that "housing is important for downtown," though the company is keeping all options on the table.
From Closure to Collaboration
The announcement represents a significant pivot from Macy's original 2024 plan to sell the building as part of a nationwide consolidation closing 150 "underproductive" stores. ABC7 reported at the time that at least 400 employees would be impacted by the closure. But the building proved too big to move quickly—and that delay may have created an opportunity for something more ambitious than a simple sale.
The joint venture agreement suggests Macy's isn't planning to sell the building after all, at least not in the near term, according to the Chronicle. Instead, TMG will work with the retailer to conduct a "strategic assessment" of the property, exploring adaptive reuse and upgrades that "align with the needs of today's office workers, residents, visitors, retail, and local businesses," Macy's said in a statement.
The Developer Behind the Deal
TMG Partners brings serious credentials to the table. Founded in 1984 and headquartered in San Francisco, the firm has developed more than 30 million square feet of office, retail, residential, and industrial properties across the Bay Area, according to the company's website. Covarrubias, who joined TMG in 1988 and has led the company since 1995, previously spent 17 years with Union Bank managing commercial and real estate lending.
The Macy's project isn't TMG's only downtown bet. As reported by The San Francisco Standard, the developer is in contract to purchase the Metreon mall at Mission and Fourth streets, which is more than 90% leased and anchored by Target and AMC's IMAX theater. In September, TMG also acquired 149 New Montgomery Street, a historic office building it plans to renovate for tech and AI tenants, according to The Real Deal.
Housing Conversion: Dream or Pipe Dream?
The tantalizing possibility of converting the Macy's building to housing comes with a major caveat: it's really, really expensive. Covarrubias himself acknowledged the challenge. "It's tough to find the right building, and the costs are killer in San Francisco," he told the Chronicle, adding that eventually residential rents will need to rise to justify conversions.
San Francisco has struggled to get office-to-housing conversion projects off the ground despite aggressive efforts. The Standard reported that despite being one of the nation's poster children for office vacancies and housing unaffordability, San Francisco doesn't even crack the list of the top 20 U.S. metro areas with the most conversion units in the pipeline. The entire Bay Area has only 150 conversion units in the pipeline, compared to 5,820 in Washington, D.C., according to data from RentCafe and Yardi Systems.
A joint study by SPUR and ULI San Francisco found that with today's construction costs and rents, such projects are not financially feasible because they generate less value than maintaining office use. The city has begun addressing this challenge with recent planning code changes and incentive programs.
More Than Just Housing on the Table
The property's C-3 zoning allows for much more than residential use. According to the Chronicle, TMG could pursue office, lab and institutional space, retail, light industrial, arts and entertainment uses—or some creative combination. With nearly a full city block to work with, the possibilities are genuinely exciting.
The timing of the announcement couldn't be more strategic. As noted by the Chronicle, thousands of real estate professionals are flooding downtown this week for the Urban Land Institute conference, the first in-person gathering since the pandemic started. Covarrubias credited Mayor Daniel Lurie's administration and "a little thing called AI"—referring to the growth of AI startups spurring new office leasing downtown—for moving the city in the right direction.
Union Square's Comeback Narrative
The Macy's deal adds momentum to what's increasingly looking like a legitimate Union Square revival. After years of brutal closures—including Nordstrom, The North Face, and the original Zara and Uniqlo locations—the district is finally seeing new energy. As reported by SFGATE, Uniqlo is returning to a Market Street location in 2026, while Zara is opening a four-story, 40,000-square-foot flagship at 400 Post Street to replace its smaller location.
According to SFGATE, retail broker Kazuko Morgan of Cushman & Wakefield, who has worked in Union Square for over 20 years, described the current momentum: "It's like somebody turned a faucet on." New openings include Pop Mart at 200 Powell Street, Moscot at 75 Geary Street, and restaurant additions like Michael Mina's Bourbon Steak and Steph Curry's Eighth Rule bar at the Westin St. Francis.
Mayor Lurie, who took office in January 2025, has made downtown revival a cornerstone of his administration. According to Wikipedia, a San Francisco Chronicle poll released in July 2025 found that 73% of respondents approved of his mayorship, with residents praising his focus on cleanliness and crime reduction. As reported by The Standard, Lurie has marshaled close to $100 million in private capital since taking office through his Heart of the City initiative.
What Happens Next
TMG and Macy's plan to share details about potential plans and next steps in the coming months, according to the Chronicle. No closing date for the store has been set, and no applications have been filed with the Planning Department, The Standard reported.
For now, the store remains open and operational—continuing to serve customers daily while also hosting traditional holiday attractions. The store will present its iconic Great Tree in Union Square this holiday season with support from blockchain firm Ripple, and will host the San Francisco SPCA's Holiday Windows pet-adoption attraction, according to San Francisco Examiner.
Whether the building ultimately becomes housing, a mixed-use destination, or something entirely unexpected, the TMG partnership represents a fundamentally different approach than a distressed sale. And for a neighborhood that's spent the past few years fighting for survival, that difference might be everything.
