One Union Square, a mixed-use building home to luxury clothing and jewelry storefronts in San Francisco, is the latest potential casualty in one of the nation’s hardest-hit retail epicenters.

Despite counting a nearly full tenant roster of stores and office users, the New York-based owners of the 41,000-square-foot building may be forced to hand back the keys after failing to repay the property's $50 million mortgage, according to a notice from the building's lender.

Owners Brookfield Properties and Ashkenazy Acquisition got a notice of default from the lender, Citigroup, after it said they fell behind on payments totaling $774,000. Citigroup is now seeking court approvals to take over the property and appoint a receiver to oversee a potential sale, according to Citigroup's filings with the county of San Francisco. Brookfield didn't reply to an email request to comment.

The default comes as Union Square — San Francisco's commercial hub known for its collection of upscale stores and hotels — struggles to regain its footing in the wake of the COVID-19 pandemic that sent residents to suburban markets and kept shoppers at home. Availability rates in the area are hovering around 21%, well above the 6% for greater San Francisco and the nationwide average of 4.8%, according to a CoStar analysis.

“We must aggressively and creatively reimagine downtown," said Scott Wiener, a state senator representing San Francisco, in a statement. "We’re advancing legislation to expedite San Francisco's ability to make needed changes."

Macy's plans to close its longstanding flagship location in Union Square as part of its national consolidation efforts. Local officials said the 400,000-square-foot store that's been open since the end of World War II is one of 150 set for closing that Macy’s announced on Tuesday.

"The loss of population during the pandemic, then the loss of office workers and tourists, all reduced activity and retail spending" in Union Square, said Nigel Hughes, senior director of market analytics at CoStar Group.

The default documents with the county indicate a foreclosure cannot occur for 90 days. Citigroup is seeking a receiver for a private sale of the property, according to the county documents.

Notices of defaults are on the rise in the United States after experiencing record lows right before the pandemic, according to a report by the Federal Reserve. The number of default notices rose 2% in 2023 and is expected to climb again this year.

“Market expectations of defaults over the next year rose as investor perceptions of the economic outlook worsened,” the report said.

Retail tenants at One Union Square include jeweler Bulgari and French-Italian retailer Moncler. WeWork operated a 10,000-square-foot location at the building before terminating its lease last year as part of Chapter 11 bankruptcy proceedings.

Brookfield became a 50% partner in the property at 200-212 Stockton St. and 172-180 Geary St. in 2018 after it acquired Chicago-based GGP for $15 billion and took control of more than 700 assets, according to CoStar data. Ashkenazy and GGP jointly purchased One Union Square and a nearby retail building in 2013 for $154 million, or $2,625 per square foot.

The other retail property spanning some 17,000 square feet at 1 Stockton St. previously housed Apple's San Francisco flagship; the technology company has since moved to a different location in Union Square at 300 Post St. T-Mobile filled the vacancy left by Apple but it shuttered that location last year.

One Union Square was fully occupied at the time of the 2013 sale; recent reports and CoStar data indicate the property's occupancy is now closer to 87%.

About six months ago, Nordstrom announced the closure of its 300,000-square-foot location at the San Francisco Centre after 35 years in business.

A few weeks after that loss, mall owners Westfield and Brookfield Properties halted payments on its $560 million loan and began the process of transferring ownership to the lender, according to CoStar data.

Other stores that have recently shuttered locations in San Francisco include Lucky Brand, J. Crew, Hollister, Adidas, Aldo and Lego.