The announced departure of the Chronicle from South of Market after more than a century in its iconic building is the latest instance of the stark emptying of the area around Powell Street, once a booming hub for shoppers, tech workers and travelers en route to nearby hotels, shops and conventions. 

Though the move is temporary, the Chronicle’s departure will likely last for years. 

It comes as the immediate neighborhood is at a critical juncture: Downtown’s recovery has been a primary focus for city officials for several years now, yet businesses continue to flee the area. This week, Bloomingdale’s announced its decision to shutter its flagship store inside the San Francisco Centre mall, which is located across the street from the news company’s headquarters at 901 Mission St., in March. A Walgreens on Market Street is also slated to close, adding to a toll that includes Nordstrom, Old Navy and the Cinemark movie theater. Last summer, 24-hour Denny’s closed near Fourth and Mission streets, and SF Pizza, a restaurant under the Fifth and Mission parking garage, shuttered this month. And the historic San Francisco Mint, a grand building across from the Chronicle, sits empty most of the year, save for a scattering of limited run events.

The decision by parent company Hearst to break traditional tethers by shifting the Chronicle and its sister company SFGate from the 1924 Gothic Revival style building at 901 Mission to a sleek 16-story high-rise tower at 450 Sansome St. in the Financial District was prompted by an effort to finish what Hearst had started before the pandemic: a 400-unit condo tower that would further infuse its incomplete mixed-use campus spanning four acres between Fifth, Mission and Howard streets, with life. 

It would be the final piece of the massive 5M project that transformed — and many would argue, improved — nearby blocks, but also collided with the post-pandemic slump that has seized the area, causing the project to fail to achieve the vision for a larger revitalization plan conceived nearly a decade ago. 

A once fenced-off parking lot that had served as the centerpiece of the 5M project area today is a carefully manicured park featuring an outdoor performance space. But plans to program the lush public amenity with concerts and cultural events were derailed by the pandemic.

A massive 640,000-square-foot office tower at 415 Natoma St., the biggest part of the project, is 97% vacant.

“There was the thinking that (5M) would really revitalize the area, which everyone was optimistic about,” said Marty Cepkauskas, Hearst’s senior director of real estate. “Unfortunately with COVID, and buildings staying vacant, and workers not coming downtown, you don’t have the activity in the area to live up to that plan and its potential.” 

Cepkauskas sees progress, such as a new residential building known as The Geroge at 434 Minna, and once gritty alleys that were transformed into clean and pedestrian-friendly footpaths. 

But, there are still fewer office workers and less foot traffic compared to 2019. Before the pandemic, food trucks would draw hordes of hungry tech workers multiple times a week in an alleyway behind the Chronicle building. Those food trucks and the crowds are largely gone. Tech companies that once operated in the vicinity like Zendesk, Eventbrite and Yahoo have all either left or cut their office space. Convention traffic spillover has also slowed from nearby Moscone Center, while drug usage and quality of life issues on long-troubled Sixth Street to the west is “significantly worse” in recent months, according to police. Yet, Mayor Daniel Lurie said he is prioritizing public safety and that the city is “open for business.”

Longtime stakeholders of the downtown neighborhood feel like they have been shortchanged.

“It hasn’t hurt us, but I don’t know if it’s necessarily helped,” said Justin Trujillo, owner of the Tempest Bar at 431 Natoma St. “The new buildings are emptier than they (the developers) hoped they would be. Of course, a lot has changed from when they started the project to where we are now. I remember when the first plans for 5M were brought to me over a decade ago. The pandemic was something nobody could have predicted.”

Joshua Manzo, a former bartender at Tempest, had more choice words.

“What we were promised when 5M was being done was that it would bring more business into the area, more people. I just hate that there is a lack of housing. But, it’s insane to me that here you have a whole building sitting empty,” Manzo said, while pointing at the 5M office tower at 415 Natoma. “Downtown is a little lost. We have empty buildings, and yet we have a housing crisis. To me, that doesn’t make any sense.”

Alex Sagues, a retail broker with CBRE who has handled leases in the area, said he did not see Friday’s news about the Chronicle’s and SFGate’s planned departure from Fifth and Mission coming.

Also surprising was Hearst’s plan to advance the condo project in the current market, which has seen development projects freeze across the city due to high costs and changing demand. Hearst said it is problem-solving around how to reboot the arrested development.

Sagues expects that it could take at least two to three years before development comes back. Still, he’s also a firm believer in downtown and the Fifth and Mission area, given its proximity to Union Square and downtown.

“I think there’s a huge opportunity in the area,” he said. “While this is a period of change in San Francisco, the neighborhood remains an integral part of the larger community.”

The Chronicle’s exit adds more uncertainty for local businesses that have survived COVID.

Joe Kane and Fi Tjioa have run a small coffee shop on the ground floor of the Chronicle building since the mid-’90s. On Friday, they were also startled by the news.

“We know about the development plans, but it’s been so long and nothing happened,” Tjioa said.

She is hopeful that business from the nearby University of the Pacific dental school and convention traffic will be enough to continue to sustain their 30-year run in the neighborhood. But what comes next for them is not clear. 

“I’ll miss all the Chronicle customers here. It was a surprise,” she said. “But I think we will be OK.”

Trujillo, the Tempest’s owner, said: “I hope the new condo project brings more people in, that it brings people who have never been here before — but you can’t ignore what it’s going to take away.”

In contrast to their current location, the Chronicle and SFGate are headed to 450 Sansome near the Transamerica Pyramid and Jackson Square — an area that’s emerged as a business hot-spot in recent years, drawing hundreds of millions of dollars in new investment and fresh enthusiasm about the future of San Francisco. Jony Ive, designer of the iPhone, has bought multiple buildings for his design studio, while new restaurants and tenants are filling the newly renovated Pyramid.

 “If you have an office in Jackson Square, it doesn’t feel like you’re in an office,” said Robbie Silva, executive director of the Downtown Partnership, which promotes and cleans the neighborhood. “There’s no doubt that 2024 was the year for Jackson Square. I think that will only continue. With the recent changing of hands of these buildings, it’s paving a way for a new generation of property owners who, as we see time and time again, are valuing amenities — not only for the building but also for the community at large.”

In regard to other pockets of downtown, particularly the “micro areas” that have continued to struggle post-pandemic like Fifth and Mission,” Silva said that he believes the long term answer is “development, development, development.”

 But, “it’s going to take a while for that to happen,” Silva said. 

Cepkauskas, of Hearst, said that when opportunities present themselves, it’s imperative to take action.

“We decided a good use of time right now would be preparing the site for redevelopment, which is in our control. The opportunity for 450 Sansome popped up, and you can never really pick the timing,” he said.

“We decided to move forward with it. Now, we have one piece of the puzzle locked in. Hopefully the city comes back quickly, and we can find a way to move forward with residential development. I’ve been in this area for 30 years, and I believe in it.”

Reach Roland Li: roland.li@sfchronicle.com; X: @rolandlisf,Reach Laura Waxmann: laura.waxmann@sfchronicle.com