For the optimized office worker looking for the trifecta of fast, healthy and filling, few meals are more efficient than a pile of veggies and some dressing swirled with tofu or grilled chicken. Unfortunately, the aspirations of a salad are often dashed by the difficulty of making one that is actually good. The ingredients come from every corner of the supermarket, and if they aren’t combined in the right proportions, or if they are made too far in advance, every bite is a drag.

Ms. Silverglide, 42, the chief executive of Mixt, tried to solve this problem with a setup in which customers proceeded down a counter and called out ingredients like grilled chicken and roasted brussels sprouts while stipulating exactly how much dressing they wanted. She said the naysayers of the time told her that there weren’t enough salad eaters to sustain her company, or that only women would eat there.

Instead, lines extended down the block, and Yelp’s users gave the business three and a half stars. People like Mike Ghaffary discovered a healthier kind of lunch in a restaurant where customization was encouraged.

Mr. Ghaffary is a former Yelp executive and serial optimizer who went to Mixt in search of a vegan meal that was high in protein and low in sugar. The salad he came up with paired lentils, chickpeas and quinoa with greens and a cilantro jalapeño vinaigrette.

Over the next several years, as Yelp grew and went public, Mixt thrived alongside it, adding a dozen locations through downtown and other city neighborhoods. Mr. Ghaffary became something of a Mixt evangelist (“He was very proud of the beany salad he came up with,” Mr. Stoppelman said) and ordered his vegetable concoction so frequently that the salad was added to the permanent menu and still sits on the board under the name “Be Well.”

In the city, however, well-being was taking a hit.

The tech companies that San Francisco had tried so hard to attract were now the target of regular protests, including some by demonstrators who at the end of 2013 began blocking commuter buses from Google and other companies to show their rage at rents that now sit at a median of $3,600. This was an opening gesture in what would become an ongoing debate about gentrification and the effect of tech companies on the city — a debate that played out in arguments over homeless camps, votes to stop development and countless more protests.

All of this was rooted in the cost of housing, which had been expensive for decades but had morphed into a disaster. A local government that had all but begged tech companies to set up shop there was now pushing a raft of new taxes to deal with its spiraling affordable housing and homelessness problems. In 2017, the year the Salesforce Tower eclipsed the Transamerica Pyramid as the city’s tallest skyscraper, Mr. Florida published another book. It was called “The New Urban Crisis.”

The post What Comes Subsequent for San Francisco’s Emptied Downtown appeared first on Los Gatos News And Events.

After a 21st-century gold rush created by big tech, downtown San Francisco is going to have to reinvent itself. Again.

The city of undulating streets, panoramic views, and booms and busts is now facing a major economic upheaval, as persistent crime, homelessness and high costs are keeping many tech office workers away, and making tech companies rethink their offices. While the city is lately portrayed as going through an apocalyptic descent into hell, this is really just another bad bust cycle for a downtown core that has experienced many before.

After a host of companies moved out in the 1980s, San Francisco saw the beginnings of an economic rebirth in the mid-1990s, when it became the hipper outpost of Silicon Valley, beginning with the dot-com boom with startups renting former industrial spaces in the then-low-rent South of Market district.

But the city became an extension of Silicon Valley for the first time in the past decade, as a generation of startups like Salesforce Inc.
CRM,
-1.70%,
Twitter Inc.
TWTR,
Pinterest Inc.
PINS,
-1.63%,
Uber Technologies
UBER,
+11.97%
and Airbnb
ABNB,
+2.00%
grew up, went public and stayed in San Francisco’s Financial District or nearby environs, as the city became a major hotbed of new tech, rivaling the Valley for software and mobile-app companies.

An even bigger change came from a massive influx of tech workers. So many tech workers decided to live in the city that Valley giants like Alphabet Inc.
GOOGL,
-4.27%

GOOG,
-4.39%
opened offices there, and shuttled their workers to offices in sleek but reviled buses from their San Francisco residential neighborhoods down the Peninsula to Google, Apple and Facebook headquarters in Mountain View, Cupertino and Menlo Park.

But as housing costs climbed, and homelessness and crime increased everywhere, the pandemic fueled a migration of about 7% of San Francisco’s population, or around 59,000 residents, to more affordable cities from April 2020 to July 2021, according to U.S. Census Bureau data. Cities like Atlanta and Miami are becoming new tech centers, and rural towns in Montana and Wyoming are attracting dispersed tech workers and bosses. Even cities in the surrounding region such as Oakland, Berkeley and into the Sierra Nevada, are benefiting.

Now tech companies are joining their workers, scaling down their presence in San Francisco, shedding office floors and keeping a smaller, almost satellite presence in some cases. Sentiment in the city is depressed, as crimes caused by opioids and homelessness have turned many residents, possibly for good.

A recent poll by the San Francisco Chronicle found little hope among citizens in the city’s ability to fix its chronic problems, with most of the 1,653 people surveyed expressing worry, frustration and pessimism. But the mood is no better in the real Silicon Valley, where more than half the residents said in a recent poll that they plan to leave the region in the next few years, unchanged from last year’s poll.

San Francisco’s worker problem, though, is putting its economic engine — the downtown core — at risk. Karen Chapple, director of the School of Cities at the University of Toronto and professor emerita of City & Regional Planning at UC Berkeley, led a group of researchers to study economic recoveries of downtowns across the U.S. since the start of the pandemic.

San Francisco came in dead last.

“There will always be some interesting new tech phenomenon in San Francisco,” Chapple said. “Because of the nature of the beast and the smart people and the culture, it’s a magnet, but I don’t think you will see a huge scale-up anymore, with the Big Five taking millions of square feet in downtown San Francisco, I think that is probably over.”

Kelsey Bishop, founder and chief executive of Candor, a startup professional network to help co-workers connect in a remote environment, agrees. Bishop left San Francisco in 2021 and now divides her time between Lisbon and New Jersey, mostly working remotely.

“I think San Francisco is going to have a hard time recovering from this,” she said. “What we have seen, whether it is a hybrid model or not, people want to live in beautiful places…Why work in downtown SF? I frequently heard gunshots out there, I remember huddling under my desk because there was an active shooter outside.”

How the pandemic slapped San Francisco

The pandemic-era vibes dissipated last month, when San Francisco got a nice little economic boost from Salesforce Inc.’s
CRM,
-1.70%
Dreamforce, the largest in-person tech conference since the pandemic began. Many of the 40,000 attendees celebrating Salesforce and its products were spending money downtown in hotels and restaurants.

While the feeling of a bustling downtown was a nice diversion from the emptiness that the Financial District has largely felt during the pandemic, it was only a temporary infusion into San Francisco’s economy.

The city’s downtown Financial District and South of Market have some of the lowest office attendance rates in the U.S., and San Francisco’s commercial office vacancy rate was 23% in the third quarter, according to Cushman & Wakefield Research, the same level it reached in 2003 amid the fallout of the dot-com bust. Data from the UC Berkeley researchers indicated that Salt Lake City; Bakersfield, Calif.; Columbus, Ohio; and Fresno, Calif., were the top four recovering cities, based on cellphone data of workers returning to the office. More recent data since Labor Day from Kastle Access Control Systems, the card key entry company, found 39.7% of workers in San Francisco offices were back in the office, up from 14.7% a year ago. That data is compared to a pre-COVID baseline, Cushman & Wakefield noted.

A pedestrian walks down a quiet California Street in the Financial District of San Francisco on May 9.

Bloomberg News

SocketSite created a graphic of the amount of empty office space in San Francisco, showing the equivalent of 13.8 Salesforce Towers — the 1,070-foot-high skyscraper towering over downtown — is sitting unoccupied, based on 18.7 million square feet of vacant office space in the second quarter, including 5 million of sublease office space on the market. In the third quarter, that number grew to 19.9 million square feet of available space, according to Cushman & Wakefield.

“We need to re-envision how the city is structured,” said Jennifer Stojkovic, executive director of sf.citi, a tech trade association. “I think there has been a large number of legislative officials who have not taken the downtown recovery seriously. Most people were banking on things recovering by now.”

San Francisco’s proposed $14 billion annual budget is estimating an almost 6% drop in business taxes, to $902.3 million in fiscal 2022-’23, from $957.1 million in 2021-’22. But the city will make up those lost funds with an estimated $60 million in taxes from the newly enacted executive pay tax, a measure that sf.citi fought against.

“San Francisco has a Frankenstein tax system,” Stojkovic said, adding that all the recent tax measures voted on by the city were during boom times. “It was all based on the longest bull market in 100 years. We said we cannot keep adding all these taxes.”

The city is projecting that both sales taxes and hotel taxes will grow this fiscal year, but those numbers could prove to be optimistic if more business does not return. Another looming potential revenue loss, albeit temporary, could come from property owners who are appealing their property assessments with the city, arguing that their property taxes should be reduced to reflect lower assessed property values. Ted Egan, the city’s chief economist, said that there has been a large number of appeals filed, but they have not been heard yet. He noted that the reassessments are mostly being filed by newer property owners, who bought buildings in 2019, for example.

Based on the amount of office space available, a lot of tech may be gone for good, or stay with a vastly reduced presence. For example, in August 2020, Pinterest canceled its plans to lease 490,000 square feet in a downtown office building under construction near the CalTrain transit station, paying $89.5 million to cancel the lease. Instead, it is keeping its nearby headquarters. Oracle Corp.
ORCL,
-1.23%,
which moved its headquarters to Austin, Texas, from Redwood City, Calif., subleased four of its five floors in San Francisco, or about 86,000 square feet.

A failure to act

There have been some discussions on how to remake parts of downtown, or include more culture and arts. But San Francisco Supervisor Ahsha Safai, who represents District 11, which includes southeastern residential districts but not downtown, has been one of the more cautionary voices trying to get the city to wake up. He said the issues downtown have a spillover effect, hurting union workers, such as janitors and hotel workers, and small businesses, to name a few.

“All this has a massive ripple effect on our economy,” he said. “We can’t just hope that people are going to come back to the office.”

Safai organized a couple of sessions of the Board of Supervisors’ Land Use Committee to discuss the problem over the past year. This month, he proposed a working group to focus on the problems, saying it is essential to have an “honest conversation” about how to reinvent the downtown core.

“There might be some land-use changes. We might need to allow more conversion of buildings to residential, convert more to entertainment,” Safai told MarketWatch. “But we have to go through that process of change, determine what level of office needs to be preserved and what needs to be transitioned.”

Many in the real estate community, though, see the city keeping its status as a tech center. “There is some concern about the future of the leasing market in San Francisco,” said Bill Cumbelich, an executive vice president of CBRE in San Francisco. “With some tech companies going completely remote, questions rise there, but I have to say now that San Francisco has established itself as a tech city, it is very good for the city going forward, compared to where we were in the ’90s.”

Cumbelich recalled the 1980s, when companies like Bank of America
BAC,
+0.44%,
Chevron
CVX,
+0.73%
and Pacific Bell moved their headquarters out of the city, as a real stagnant time, until tech began to emerge as a new industry in the mid-1990s.

“Since that early ’80s exodus, before that I don’t think we had seen those types of big shocks to the office market,” he said.

Cumbelich believes that the so-called Class A property buildings, such as 140 New Montgomery, the former headquarters of Pacific Telephone and then AT&T, will fare well in the current upheaval. Last year, Yelp Inc.
YELP,
+0.65%
did not renew its 14 floors, or about 162,000 square feet of space, in the building, but some of that has since been leased, Cumbelich said. He said many building owners are currently engaged in an “amenities arms race” to fix up their buildings to attract new tenants, adding that some of 140 New Montgomery’s features — like its garden courtyard, bike parking and gorgeous lobby — attract tenants and their workers.

“There are a lot of lobby refreshes going on, exterior decks, conference centers, activation of lobbies, lot of upgrading and improvements going on,” he said. “A lot of offices are adopting a hospitality focus, having things that are appealing like a hotel would…to make it more appealing for workers.”

Indeed, some areas of downtown are busier. Some lunch restaurants have reopened since the pandemic, and there are more people walking in the streets during the day. On a Monday night after Dreamforce was long over, it was busy at Tadich Grill, one of the city’s oldest restaurants. But it’s still not like it was, and some businesses are still seeing a huge drop in revenue.

“Our hours are reduced,” said Steve Sarder, co-owner of Ladle & Leaf, a popular family-owned soup-and-salad restaurant chain. “The locations that used to be open for breakfast are no longer open for breakfast.” Ladle and Leaf closed three of the 13 locations it had prior to the pandemic.

Pedestrians walk by an empty Financial District restaurant on Aug. 25, 2022 in San Francisco.

Getty Images

“We are down 65%. It would be worse if it weren’t for so many restaurants being closed. When I look at the traffic in the buildings that we occupy, I think the downtown traffic is around 25% of what it was, pre-pandemic.” When workers only come downtown to the office once or twice a week, they are only spending a fraction of what they used to on a daily basis, he noted.

“That doesn’t make the economic core a vibrant community,” Sarder said.

“The changes we went through with the pandemic are somewhat permanent,” said Jeb Miller, general partner in Icon Ventures, a venture-capital firm with offices in Palo Alto and San Francisco. “About half of our portfolio companies have an office-space location and are fully remote. But that kind of hybrid state of one or two days in the office seems to be where we are heading.” Miller said that in the South Park neighborhood, for example, where his San Francisco office is located, things are happening, even if remote and hybrid work are becoming a permanent way of life.

“You see kids coming back, entrepreneurs and VCs are out on the lawn, I think that’s the first place that will recover,” he said. Miller remains optimistic about San Francisco. “I think S.F. will still remain the heart of innovation, we have a lot of success that fuels the flywheel of giving back. Talent that is here, that helps the next wave of companies. I think our tolerance for failure here is high, there is a lot of experimentation. There will be some creativity, companies sharing office space, probably a little more reduced footprint, a more creative use of space.”

Egan, the city’s chief economist, believes that working from home is still evolving, and is very fluid, and could change on a dime.

“A recession could change the mood for work from home,” he said. “Employers could change. If the market loosens up a lot employers will be a better bargaining position. Ultimately companies have to be productive…it’s far from settled.” However, if the current situation does become as permanent as some VCs and entrepreneurs believe, “it could have a big shock on property values.”

Indeed, according to CEOs interviewed for a study by KPMG this week, over 50% of them are considering job cuts over the next six months. In a separate survey by beautiful.ai, a majority of managers (60%) said remote workers would likely be among the first to go.

But as seen in the Chronicle poll, the dour look at crime and safety in the city pervades many viewpoints.

“You have become a victim of your own success,” said Robert Ackerman Jr., managing director and founder of AllegisCyber Capital, who sold his home in the city’s posh Pacific Heights neighborhood and moved to Wyoming two years ago. Doing a renovation on his building with a scaffolding required a 24-hour security guard. “I live on airplanes so I can live anywhere…I just saw the steady decline of quality of life in the city, it’s not for me.” Ackerman said some of his investments have been taking him frequently to Maryland, where there are an increasing number of cybersecurity startups, founded by engineers who got their start at places like the National Security Agency.

Ackerman believes that the old adage for entrepreneurs that you had to be in Silicon Valley or San Francisco to start a company is no longer true. “Once upon a time Silicon Valley had the whole game, that is not true anymore.” He said other cities that have been attracting entrepreneurs do not have all the whole ecosystem that has been in place in the Bay Area for decades: mentoring, access to capital, legal services, stellar talent from top universities — but that infrastructure is coming.

Recent Cushman & Wakefield and PitchBook data indicate that funding for San Francisco-based startups is on the wane as well. In the third quarter, San Francisco-based startups raised $5.5 billion, down 48% from the second quarter.

 “I am relatively bullish on the Bay Area, but I am also bullish on other cities rising further than they have in the pandemic,” said Gaurav Gupta, a partner at Lightspeed Ventures. “Founders want to be around the founders of their peer [companies], who they admire; they also want to be near where the talent is. And finally they want to be near their investors.” He said he has seen a few companies opening up offices in San Francisco, as a home base or a place to host company events. He said deal cycles are a bit slower now, and pricing is coming down too.

“Things were extremely concentrated in San Francisco for many, many years,” Gupta said. “That does get more distributed to these other hubs, including New York.”

One possibility some have discussed is whether large building owners will look into converting all or some of their office towers for residential use, as some cities have done, such as in New York’s Battery Park City and downtown Los Angeles. But for building owners, converting an office building, especially the more contemporary ones, to apartments or condos would be a costly and unprofitable proposition.

“I think it has potential on a limited basis,” said John Bryant, chief executive of the Building Owners and Managers Association of San Francisco. “People thinking a mass conversion is going to solve the problem is shortsighted. I don’t think it’s technically or financially feasible.” He pointed out that some of the big challenges are the floor plates of big office buildings, and the tall glass windows in so many skyscrapers.

“How do you break it up, versus an office environment?” Bryant said. “You will probably lose 10-15% of rentable square footage. What is the premium I am going to get on residential? It’s not going to be much higher.”

Moscone Center was busy with 40,000 attendees in September for Dreamforce

Therese Poletti

The past shows that the future is not hopeless

San Francisco has rebounded from hard times before. The flag of the city has an image of a Phoenix, the mythical bird that rises from the ashes, which has often been thought to reference the city’s emergence from the devastation of the crippling 1906 earthquake and fire, but likely actually stemmed from the early fires of the early 1850s and its frequent rebirths after the 1849 Gold Rush.

But the bounce-back from the 1906 devastation had powerful business leaders behind it, including French immigrant, department-store magnate and philanthropist Rafael Weill, who led a group of merchants to find and open temporary store locations while their stores were being rebuilt.

The city currently lacks any vocal or involved tech executives who are passionate about San Francisco. Marc Benioff, the co-founder and co-CEO of Salesforce.com, who was once bandied about as a mayoral candidate, now seems more focused on employee retreats near Santa Cruz and his life in Hawaii, rather than on what ails San Francisco. Salesforce, the city’s largest corporate employer, canceled its lease for 325,000 square feet of space in an unbuilt skyscraper near Salesforce Tower.

San Francisco has a history of creating and recreating itself, from an instant city during the Gold Rush, to rising from the ashes of the 1906 quake, to an eventual recovery after the dark days of the 1970s and the assassinations of Supervisor Harvey Milk and Mayor George Moscone. The city that knows how will always evolve and change, but hopefully will never lose its magic.

The post Opinion: Downtown San Francisco turned the epicenter of Silicon Valley’s growth, however now it have to be reinvented appeared first on Los Gatos News And Events.

After a 21st-century gold rush created by big tech, downtown San Francisco is going to have to reinvent itself. Again.

The city of undulating streets, panoramic views, and booms and busts is now facing a major economic upheaval, as persistent crime, homelessness and high costs are keeping many tech office workers away, and making tech companies rethink their offices. While the city is lately portrayed as going through an apocalyptic descent into hell, this is really just another bad bust cycle for a downtown core that has experienced many before.

After a host of companies moved out in the 1980s, San Francisco saw the beginnings of an economic rebirth in the mid-1990s, when it became the hipper outpost of Silicon Valley, beginning with the dot-com boom with startups renting former industrial spaces in the then-low-rent South of Market district.

But the city became an extension of Silicon Valley for the first time in the past decade, as a generation of startups like Salesforce Inc.
CRM,
-3.33%,
Twitter Inc.
TWTR,
-0.43%,
Pinterest Inc.
PINS,
-2.75%,
Uber Technologies
UBER,
-5.58%
and Airbnb
ABNB,
-2.72%
grew up, went public and stayed in San Francisco’s Financial District or nearby environs, as the city became a major hotbed of new tech, rivaling the Valley for software and mobile-app companies.

An even bigger change came from a massive influx of tech workers. So many tech workers decided to live in the city that Valley giants like Alphabet Inc.
GOOGL,
-2.70%

GOOG,
-2.61%
opened offices there, and shuttled their workers to offices in sleek but reviled buses from their San Francisco residential neighborhoods down the Peninsula to Google, Apple and Facebook headquarters in Mountain View, Cupertino and Menlo Park.

But as housing costs climbed, and homelessness and crime increased everywhere, the pandemic fueled a migration of about 7% of San Francisco’s population, or around 59,000 residents, to more affordable cities from April 2020 to July 2021, according to U.S. Census Bureau data. Cities like Atlanta and Miami are becoming new tech centers, and rural towns in Montana and Wyoming are attracting dispersed tech workers and bosses. Even cities in the surrounding region such as Oakland, Berkeley and into the Sierra Nevada, are benefiting.

Now tech companies are joining their workers, scaling down their presence in San Francisco, shedding office floors and keeping a smaller, almost satellite presence in some cases. Sentiment in the city is depressed, as crimes caused by opioids and homelessness have turned many residents, possibly for good.

A recent poll by the San Francisco Chronicle found little hope among citizens in the city’s ability to fix its chronic problems, with most of the 1,653 people surveyed expressing worry, frustration and pessimism. But the mood is no better in the real Silicon Valley, where more than half the residents said in a recent poll that they plan to leave the region in the next few years, unchanged from last year’s poll.

San Francisco’s worker problem, though, is putting its economic engine — the downtown core — at risk. Karen Chapple, director of the School of Cities at the University of Toronto and professor emerita of City & Regional Planning at UC Berkeley, led a group of researchers to study economic recoveries of downtowns across the U.S. since the start of the pandemic.

San Francisco came in dead last.

“There will always be some interesting new tech phenomenon in San Francisco,” Chapple said. “Because of the nature of the beast and the smart people and the culture, it’s a magnet, but I don’t think you will see a huge scale-up anymore, with the Big Five taking millions of square feet in downtown San Francisco, I think that is probably over.”

Kelsey Bishop, founder and chief executive of Candor, a startup professional network to help co-workers connect in a remote environment, agrees. Bishop left San Francisco in 2021 and now divides her time between Lisbon and New Jersey, mostly working remotely.

“I think San Francisco is going to have a hard time recovering from this,” she said. “What we have seen, whether it is a hybrid model or not, people want to live in beautiful places…Why work in downtown SF? I frequently heard gunshots out there, I remember huddling under my desk because there was an active shooter outside.”

How the pandemic slapped San Francisco

The pandemic-era vibes dissipated last month, when San Francisco got a nice little economic boost from Salesforce Inc.’s
CRM,
-3.33%
Dreamforce, the largest in-person tech conference since the pandemic began. Many of the 40,000 attendees celebrating Salesforce and its products were spending money downtown in hotels and restaurants.

While the feeling of a bustling downtown was a nice diversion from the emptiness that the Financial District has largely felt during the pandemic, it was only a temporary infusion into San Francisco’s economy.

The city’s downtown Financial District and South of Market have some of the lowest office attendance rates in the U.S., and San Francisco’s commercial office vacancy rate was 23% in the third quarter, according to Cushman & Wakefield Research, the same level it reached in 2003 amid the fallout of the dot-com bust. Data from the UC Berkeley researchers indicated that Salt Lake City; Bakersfield, Calif.; Columbus, Ohio; and Fresno, Calif., were the top four recovering cities, based on cellphone data of workers returning to the office. More recent data since Labor Day from Kastle Access Control Systems, the card key entry company, found 39.7% of workers in San Francisco offices were back in the office, up from 14.7% a year ago. That data is compared to a pre-COVID baseline, Cushman & Wakefield noted.

A pedestrian walks down a quiet California Street in the Financial District of San Francisco on May 9.

Bloomberg News

SocketSite created a graphic of the amount of empty office space in San Francisco, showing the equivalent of 13.8 Salesforce Towers — the 1,070-foot-high skyscraper towering over downtown — is sitting unoccupied, based on 18.7 million square feet of vacant office space in the second quarter, including 5 million of sublease office space on the market. In the third quarter, that number grew to 19.9 million square feet of available space, according to Cushman & Wakefield.

“We need to re-envision how the city is structured,” said Jennifer Stojkovic, executive director of sf.citi, a tech trade association. “I think there has been a large number of legislative officials who have not taken the downtown recovery seriously. Most people were banking on things recovering by now.”

San Francisco’s proposed $14 billion annual budget is estimating an almost 6% drop in business taxes, to $902.3 million in fiscal 2022-’23, from $957.1 million in 2021-’22. But the city will make up those lost funds with an estimated $60 million in taxes from the newly enacted executive pay tax, a measure that sf.citi fought against.

“San Francisco has a Frankenstein tax system,” Stojkovic said, adding that all the recent tax measures voted on by the city were during boom times. “It was all based on the longest bull market in 100 years. We said we cannot keep adding all these taxes.”

The city is projecting that both sales taxes and hotel taxes will grow this fiscal year, but those numbers could prove to be optimistic if more business does not return. Another looming potential revenue loss, albeit temporary, could come from property owners who are appealing their property assessments with the city, arguing that their property taxes should be reduced to reflect lower assessed property values. Ted Egan, the city’s chief economist, said that there has been a large number of appeals filed, but they have not been heard yet. He noted that the reassessments are mostly being filed by newer property owners, who bought buildings in 2019, for example.

Based on the amount of office space available, a lot of tech may be gone for good, or stay with a vastly reduced presence. For example, in August 2020, Pinterest canceled its plans to lease 490,000 square feet in a downtown office building under construction near the CalTrain transit station, paying $89.5 million to cancel the lease. Instead, it is keeping its nearby headquarters. Oracle Corp.
ORCL,
-3.08%,
which moved its headquarters to Austin, Texas, from Redwood City, Calif., subleased four of its five floors in San Francisco, or about 86,000 square feet.

A failure to act

There have been some discussions on how to remake parts of downtown, or include more culture and arts. But San Francisco Supervisor Ahsha Safai, who represents District 11, which includes southeastern residential districts but not downtown, has been one of the more cautionary voices trying to get the city to wake up. He said the issues downtown have a spillover effect, hurting union workers, such as janitors and hotel workers, and small businesses, to name a few.

“All this has a massive ripple effect on our economy,” he said. “We can’t just hope that people are going to come back to the office.”

Safai organized a couple of sessions of the Board of Supervisors’ Land Use Committee to discuss the problem over the past year. This month, he proposed a working group to focus on the problems, saying it is essential to have an “honest conversation” about how to reinvent the downtown core.

“There might be some land-use changes. We might need to allow more conversion of buildings to residential, convert more to entertainment,” Safai told MarketWatch. “But we have to go through that process of change, determine what level of office needs to be preserved and what needs to be transitioned.”

Many in the real estate community, though, see the city keeping its status as a tech center. “There is some concern about the future of the leasing market in San Francisco,” said Bill Cumbelich, an executive vice president of CBRE in San Francisco. “With some tech companies going completely remote, questions rise there, but I have to say now that San Francisco has established itself as a tech city, it is very good for the city going forward, compared to where we were in the ’90s.”

Cumbelich recalled the 1980s, when companies like Bank of America
BAC,
-2.26%,
Chevron
CVX,
-0.86%
and Pacific Bell moved their headquarters out of the city, as a real stagnant time, until tech began to emerge as a new industry in the mid-1990s.

“Since that early ’80s exodus, before that I don’t think we had seen those types of big shocks to the office market,” he said.

Cumbelich believes that the so-called Class A property buildings, such as 140 New Montgomery, the former headquarters of Pacific Telephone and then AT&T, will fare well in the current upheaval. Last year, Yelp Inc.
YELP,
-1.15%
did not renew its 14 floors, or about 162,000 square feet of space, in the building, but some of that has since been leased, Cumbelich said. He said many building owners are currently engaged in an “amenities arms race” to fix up their buildings to attract new tenants, adding that some of 140 New Montgomery’s features — like its garden courtyard, bike parking and gorgeous lobby — attract tenants and their workers.

“There are a lot of lobby refreshes going on, exterior decks, conference centers, activation of lobbies, lot of upgrading and improvements going on,” he said. “A lot of offices are adopting a hospitality focus, having things that are appealing like a hotel would…to make it more appealing for workers.”

Indeed, some areas of downtown are busier. Some lunch restaurants have reopened since the pandemic, and there are more people walking in the streets during the day. On a Monday night after Dreamforce was long over, it was busy at Tadich Grill, one of the city’s oldest restaurants. But it’s still not like it was, and some businesses are still seeing a huge drop in revenue.

“Our hours are reduced,” said Steve Sarder, co-owner of Ladle & Leaf, a popular family-owned soup-and-salad restaurant chain. “The locations that used to be open for breakfast are no longer open for breakfast.” Ladle and Leaf closed three of the 13 locations it had prior to the pandemic.

Pedestrians walk by an empty Financial District restaurant on Aug. 25, 2022 in San Francisco.

Getty Images

“We are down 65%. It would be worse if it weren’t for so many restaurants being closed. When I look at the traffic in the buildings that we occupy, I think the downtown traffic is around 25% of what it was, pre-pandemic.” When workers only come downtown to the office once or twice a week, they are only spending a fraction of what they used to on a daily basis, he noted.

“That doesn’t make the economic core a vibrant community,” Sarder said.

“The changes we went through with the pandemic are somewhat permanent,” said Jeb Miller, general partner in Icon Ventures, a venture-capital firm with offices in Palo Alto and San Francisco. “About half of our portfolio companies have an office-space location and are fully remote. But that kind of hybrid state of one or two days in the office seems to be where we are heading.” Miller said that in the South Park neighborhood, for example, where his San Francisco office is located, things are happening, even if remote and hybrid work are becoming a permanent way of life.

“You see kids coming back, entrepreneurs and VCs are out on the lawn, I think that’s the first place that will recover,” he said. Miller remains optimistic about San Francisco. “I think S.F. will still remain the heart of innovation, we have a lot of success that fuels the flywheel of giving back. Talent that is here, that helps the next wave of companies. I think our tolerance for failure here is high, there is a lot of experimentation. There will be some creativity, companies sharing office space, probably a little more reduced footprint, a more creative use of space.”

Egan, the city’s chief economist, believes that working from home is still evolving, and is very fluid, and could change on a dime.

“A recession could change the mood for work from home,” he said. “Employers could change. If the market loosens up a lot employers will be a better bargaining position. Ultimately companies have to be productive…it’s far from settled.” However, if the current situation does become as permanent as some VCs and entrepreneurs believe, “it could have a big shock on property values.”

Indeed, according to CEOs interviewed for a study by KPMG this week, over 50% of them are considering job cuts over the next six months. In a separate survey by beautiful.ai, a majority of managers (60%) said remote workers would likely be among the first to go.

But as seen in the Chronicle poll, the dour look at crime and safety in the city pervades many viewpoints.

“You have become a victim of your own success,” said Robert Ackerman Jr., managing director and founder of AllegisCyber Capital, who sold his home in the city’s posh Pacific Heights neighborhood and moved to Wyoming two years ago. Doing a renovation on his building with a scaffolding required a 24-hour security guard. “I live on airplanes so I can live anywhere…I just saw the steady decline of quality of life in the city, it’s not for me.” Ackerman said some of his investments have been taking him frequently to Maryland, where there are an increasing number of cybersecurity startups, founded by engineers who got their start at places like the National Security Agency.

Ackerman believes that the old adage for entrepreneurs that you had to be in Silicon Valley or San Francisco to start a company is no longer true. “Once upon a time Silicon Valley had the whole game, that is not true anymore.” He said other cities that have been attracting entrepreneurs do not have all the whole ecosystem that has been in place in the Bay Area for decades: mentoring, access to capital, legal services, stellar talent from top universities — but that infrastructure is coming.

Recent Cushman & Wakefield and PitchBook data indicate that funding for San Francisco-based startups is on the wane as well. In the third quarter, San Francisco-based startups raised $5.5 billion, down 48% from the second quarter.

 “I am relatively bullish on the Bay Area, but I am also bullish on other cities rising further than they have in the pandemic,” said Gaurav Gupta, a partner at Lightspeed Ventures. “Founders want to be around the founders of their peer [companies], who they admire; they also want to be near where the talent is. And finally they want to be near their investors.” He said he has seen a few companies opening up offices in San Francisco, as a home base or a place to host company events. He said deal cycles are a bit slower now, and pricing is coming down too.

“Things were extremely concentrated in San Francisco for many, many years,” Gupta said. “That does get more distributed to these other hubs, including New York.”

One possibility some have discussed is whether large building owners will look into converting all or some of their office towers for residential use, as some cities have done, such as in New York’s Battery Park City and downtown Los Angeles. But for building owners, converting an office building, especially the more contemporary ones, to apartments or condos would be a costly and unprofitable proposition.

“I think it has potential on a limited basis,” said John Bryant, chief executive of the Building Owners and Managers Association of San Francisco. “People thinking a mass conversion is going to solve the problem is shortsighted. I don’t think it’s technically or financially feasible.” He pointed out that some of the big challenges are the floor plates of big office buildings, and the tall glass windows in so many skyscrapers.

“How do you break it up, versus an office environment?” Bryant said. “You will probably lose 10-15% of rentable square footage. What is the premium I am going to get on residential? It’s not going to be much higher.”

Moscone Center was busy with 40,000 attendees in September for Dreamforce

Therese Poletti

The past shows that the future is not hopeless

San Francisco has rebounded from hard times before. The flag of the city has an image of a Phoenix, the mythical bird that rises from the ashes, which has often been thought to reference the city’s emergence from the devastation of the crippling 1906 earthquake and fire, but likely actually stemmed from the early fires of the early 1850s and its frequent rebirths after the 1849 Gold Rush.

But the bounce-back from the 1906 devastation had powerful business leaders behind it, including French immigrant, department-store magnate and philanthropist Rafael Weill, who led a group of merchants to find and open temporary store locations while their stores were being rebuilt.

The city currently lacks any vocal or involved tech executives who are passionate about San Francisco. Marc Benioff, the co-founder and co-CEO of Salesforce.com, who was once bandied about as a mayoral candidate, now seems more focused on employee retreats near Santa Cruz and his life in Hawaii, rather than on what ails San Francisco. Salesforce, the city’s largest corporate employer, canceled its lease for 325,000 square feet of space in an unbuilt skyscraper near Salesforce Tower.

San Francisco has a history of creating and recreating itself, from an instant city during the Gold Rush, to rising from the ashes of the 1906 quake, to an eventual recovery after the dark days of the 1970s and the assassinations of Supervisor Harvey Milk and Mayor George Moscone. The city that knows how will always evolve and change, but hopefully will never lose its magic.

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Tech companies have been shedding large amounts of San Francisco office space over the past year, and this week, another unicorn joined in on the trend. Block, formerly known as Square, said it will not renew the lease on its former headquarters in the Mid-Market neighborhood.

That puts 470,000 square feet of space at 1455 Market St. on the commercial real estate market, shrinking the company’s presence to two smaller city offices at 760 Market St. in SoMa and 2101 Mission St. in the Mission. After the lease expires in September 2023, Block’s largest Bay Area office will now be in Oakland at Uptown Station.

A Block spokesperson said the company remains committed to the Bay Area and was looking to eliminate redundant real estate costs. It is even planning to add a small South Bay office in the future.

The payment processing company run by Twitter founder Jack Dorsey announced earlier this year it would no longer have an official headquarters and it will continue to give employees the option to work from home.

The building at 1455 Market St., which was also previously the headquarters for Uber, was originally built as a Bank of America data center and housed around 2,200 of the bank’s employees.

New office leasing has been sluggish in San Francisco as tech companies continue to delay requirements for in-person work or switch to a remote-first policy. Office transaction data reflects the decline: listing rates are down 9.3% year-over-year, according to CommercialEdge, a real estate data platform. SF office vacancy hit an all-time high in April 2021, when it surpassed even the dot-com bust, and it was the first time in five years that Manhattan’s office rental market surpassed San Francisco’s.

Block also has offices in Atlanta, New York City, Seattle, St. Louis and Scottsdale.

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More details have emerged on what the much-anticipated (and much-delayed) Ikea mall coming to San Francisco’s mid-market will look like after the first European site of its city concept opened Wednesday.

The Swedish ready-to-assemble furniture juggernaut opened its new foray into malls in London this week, and it looks nothing like the vast, mazy floor plans we’re used to finding on a trip to Ikea.

The company’s urban vision, named the Livat, meaning “lively gathering” in Swedish, will instead feature pop-ups, non-meatball food options, meeting spaces and no cars.

The mall in London, developed by holding company Ingka Centres, is anchored around the Ikea store, but also features other clothing and grocery outlets and a curiously named “Library of Things,” due to open later in April. The London store is cash free, but it is unclear if this will also be true of the San Francisco site. Footage of the London launch and a look inside the store, complete with staff greeting shoppers by waving Swedish flags, was shared on Reddit Thursday.

“The important thing is to create places which are of their community and where everyone is welcome,” Ingka Centres’ managing director Cindy Andersen told Forbes at the launch in London before reportedly traveling to San Francisco to check on the Market Street project. “Meeting places are more important than ever, we have to get away from this idea of ​​either/or for online and physical space. We completely believe in building places where people will create memories together. Livat is designed to be both of the community and a destination.”

945 Market Street, San Francisco.

Andrew Chamings/SFGATE

The mid-market store has been a long time coming. The vacant shopping center at 945 Market hasn’t seen a customer in over six years. After a series of false starts, the trials of the pandemic and floundering retail plans from various holding companies, in 2020 it was announced that Ingka would develop the 250,000-square-foot space into the the Livat urban concept, with an Ikea store occupying 70,000 feet of the space.

A fall 2021 opening date was targeted — and missed. A new opening date was not stated by Ingka, but the San Francisco Business Times reported it would “likely be pushed back a year.”

945 Market Street, San Francisco.

Andrew Chamings/SFGATE

Construction is now underway at 945 Market. The street windows are currently covered in Ikea decals reading, “A new Swede on the block,” and “Hej! We are creating your new meeting place, and extra space to be yourself!”

Ingka Centers did not share an opening date with SFGATE, but said they are “in the process of making significant improvements to the building, to create a welcoming and comfortable environment for visitors and the local community,” adding, “We look forward to sharing more details about this development in the near future.”

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Take a stroll down Montgomery Street in San Francisco’s Financial District during a weeknight and you’re not likely to see sights common in other more suburban neighborhoods: people walking their dogs or ushering their broods of children into buildings while weighted down with grocery bags filled with dinner fixings.

That’s partially because, despite the downtown area seeing a notable increase in housing units in recent years, there is seemingly low demand when units hit the market.

Data from the real estate listing database MLS shows that, since 2018, for the three ZIP codes that cover the Financial District and the areas north and south of it, units tended to spend more days on the market than in other parts of the city, and sell for a lower median list price.

Those ZIP codes are 94108, which covers a swath of California Street, Nob Hill and Chinatown down to Market Street; 94104, which is bounded by Market Street to the south and Kearney and Battery to the west and east; and 94105, which covers the area south of Market Street running to the Embarcadero and stretching south toward Oracle Park.

In 2018, properties in the Financial District area sold for a median price of $1.2 million, despite listing for a median of $1.3 million. They also spent more than twice the median days on the market, compared to units that sold throughout the city that year.

Units listed in 2019 and 2020 in that area also were more likely to sell for below their original list price, and spent a median of 62 and 70 days on the market, respectively. That was compared to a median 17 days on the market citywide in 2019, and 22 days in 2020.

In 2021, the median sale price of $1.15 million inch closer to the median list price of $1.24 million in the downtown area, although listings spent on the market about the same at 69 days compared to 16 citywide.

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Part of the reason why, industry experts suggest, is because single-family homes remain the most desirable and overbid properties in San Francisco.

“The majority of these (downtown) places, almost all of them are condos,” said Adam Brinklow of Front Steps San Francisco Real Estate, who provided the MLS data. “Over the last 10 years single family homes have been the huge driver” and in the highest demand, especially for people looking to raise a family in the city.

Which tends to be why many people who live in the downtown core are middle aged and older, established professionals who have already raised a family. People like John Dunlap, who has lived in a building at Third and Market for four-and-half years.

Dunlap said his building has been home to professional athletes, Trump and Biden administration appointees, banking executives and other established types, along with some families.

The proximity to museums and cultural institutions like the Mechanics Institute, bike rides along the Embarcadero and transit make it a more than comfortable location, Dunlap said.

While housing remains scarce in parts of the downtown core, compared to other areas of San Francisco, it has been increasing.

The area dubbed “Downtown” by The San Francisco Planning Department — roughly bounded by Van Ness Avenue, Market Street, and Sacramento Street running to the Embarcadero — saw a net increase of 8.7% in housing units between 2010 and 2021.

The area roughly bounded by Kearny and Market streets, Pacific Avenue and the Embarcadero that comprises the Downtown Community Benefit district has about 350 units spread across 11 locations, said the nonprofit group’s director Robbie Silver.

Despite the tight squeeze in one of the oldest areas of the city, the 8.7% increase was one of the highest rates in the city.

Of the city’s 15 planning districts plus the Presidio, Treasure Island and Golden Gate Park area, downtown came in fourth in net gains in housing units during the past decade, behind only the Richmond District, South of Market and the Northeast chunk of the city that includes North Beach, Chinatown and Fisherman’s Wharf.

The South of Market area came in second with a 9.4% net increase in units, much of that in the form of high rise towers like the 392 unit condo complex Mira SF on Folsom Street, and the nearby Lumina tower at 201 Folsom Street

Garrett Frakes of real estate sales and marketing firm Polaris Pacific said much of the condo and rental market near downtown is focused on that area south of Market Street that sweeps from near the Embarcadero and going south to the ballpark.

There are, “a series of very significant both rental and condo towers that enjoy the lifestyle of the waterfront and retail opportunities,” he said.

But after the recent completion of the Mira tower, there aren’t many more new units coming on the market in that area, Frakes said.

“Construction is just not moving forward,” he said, attributing that to rising construction costs among other issues.

Nearby, the area most San Franciscans think of as South of Market — what Frakes described as low-rise streets lined with Muffler shops and tech companies — has some housing stock, including lots of rental properties.

Units in that area lost around 30% of their value during the pandemic, said Paul Griffiths, CEO of Vesta Asset Management. That has climbed back by about half and units are mostly full again, Griffiths said, but rents are still below what they were compared to markets in more residential parts of the city.

Back in the downtown core, the 8.7% increase over the past decade equated to more than 35,000 units of housing.

More people living in downtown, or adjacent to it, would fit with Mayor London Breed’s plan to urge more people, including office workers, to spend more time in the area. But while other major metro areas have seen the number of people swiping into office settings increase, San Francisco has lagged behind.

Silver and his group have focused on putting on events and drawing people to the area after the offices shutter to give it more of a neighborhood feel and hurry the district’s revival. More people living there might help move the area in that direction, but for Dunlap, who already lives there, the neighborhood feel isn’t hard to find.

“After hours there’s a lot going on,” he said, noting the plentiful selection of restaurants and small shops tucked away in places like Maiden Lane along with their buildings’ architectural flourishes.

“I would welcome more residents and more housing down there,” to give the area more a neighborhood feel and voice in the city, Dunlap said. “If buildings are going to be no longer used for business or office reasons … there’s no reason that they should be languish.”

Chase DiFeliciantonio is a San Francisco Chronicle staff writer. Email: chase.difeliciantonio@sfchronicle.com Twitter: @ChaseDiFelice

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Don’t be fooled. The downtown area, the city’s primary economic driver, is teetering on the edge, facing challenges greater than previously known, new data shows. The wounds suffered by the economic core are deep, and city officials have yet to come up with a plan to make the fundamental changes that some economists and business leaders argue could make the area thrive again.

“A general economic decline is what we’re trying to avoid,” said Wade Rose, president of Advance SF, a business group that advocates on behalf of several major employers in San Francisco. The group is working with the city on short-term ideas to bring more people back downtown, but Rose agrees that the problem needs a rethink in the long run.

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Before the pandemic, office work was responsible for a whopping 72% of the city’s gross domestic product, according to the Controller’s Office — work that was heavily concentrated in the Financial District, the Market Street corridor, the Embarcadero and Mission Bay. A  precise definition for downtown doesn’t exist, and various city agencies use different boundaries, with some regarding it as the northeast portion of the city.

It is easy for San Franciscans who don’t work downtown to ignore it. The city is made up of neighborhoods that serve many of the needs of residents living in them. Relative to many other American cities, few people live in what is loosely considered downtown. The result is that many see the area as largely for office workers, tourists, conventioneers and a handful of destination restaurants.

When all office work shut down, BART ridership dropped catastrophically, and it is not projected to recover fully until the 2029-30 fiscal year at the earliest. The transit system’s looming deficit has given rise to whispers of a new regional tax to fill the gap. Without commuters spending money near their San Francisco offices each day, other downtown businesses closed, destroying the incomes of many who could ill afford it.

If swaths of shops, restaurants and cafes downtown stay shuttered, it could cause lasting harm to tourism, said Joe D’Alessandro, president and CEO of  San Francisco Travel, the city’s primary tourism and convention trade association.

“We don’t have a Disney park here,” D’Alessandro said, so San Francisco relies heavily on its hospitality industry to attract families and business groups. “Most of the hospitality industry is made up of small businesses,” he said.

Office employees make their way to work down a deserted Sutter Street at Montgomery Street in San Francisco. Jessica Christian / The Chronicle

A slow recovery

It has been a year since vacant office-space rates soared to their highest levels since the 2008 Great Recession, as some business activity has picked up. And while other major cities face large numbers of workers not going back into offices, San Francisco’s numbers are among the highest nationwide.

The San Francisco metropolitan area has consistently lagged behind nearly all other major urban centers in worker returns, according to office-occupancy trend data from Kastle Systems, a security company that monitors access-card swipes at client buildings.

In San Francisco’s downtown area specifically, office attendance has been even lower than reported. At The Chronicle’s request, Kastle provided swipe data for the eight ZIP codes that make up the city’s office-heavy northeast. The data shows the rate of worker return, relative to pre-pandemic levels, has not broken 30% and was 26.4% the week of May 18, the most recent period the company provided.

Other news reports have cited higher figures — for example, 34.6% for the same week in May — because they drew from Kastle data that included swipes from Oakland and Hayward, the two other large cities in the San Francisco metro area. And this is despite efforts by Mayor London Breed and some business leaders to urge workers to come back to their offices. A recent COVID-19 variant surge isn’t helping.

If those suites and retail spaces remain empty in the long run, “the buildings will be devalued,” Rose said, “which ultimately means that tax revenues will decline dramatically” and endanger city coffers. Another potential challenge, Rose said, is that many tech firms might see San Francisco, with its high real estate prices and taxes, as no longer worth it, given how many employees are working remotely.

“If the number of companies diminish and the number of people working in the tech industry diminishes, the network effect diminishes, and the digital engine starts cooling down,” Rose said. “And that is not a good thing.”

Even if tourism returns to pre-pandemic levels by 2024, as projected, the levels of remote versus in-office work will be the major factor in when and how the city, and downtown in particular, recovers. And the outlook is not encouraging.

“San Francisco is not likely to ever get office workers returning more than 50% of the time,” according to Nicholas Bloom, a Stanford University economics professor who studies remote work trends. In other words, an average of 2.5 days per workweek. Attempts to surpass that threshold would be like “trying to push water uphill,” he said.

Some downtown office buildings are all but deserted. Jessica Christian / The Chronicle

Bloom is part of a team that has conducted monthly nationwide surveys since early in the pandemic, each with between 2,500 and 5,000 participants. Respondents reported their employers’ latest plans for post-pandemic work policies — the number of days per week that staff would probably work from home.

In August 2020, the first instance of the survey, employers expected staff to work an average of 1.6 days per week in the office once society normalized. The figure has steadily risen since then and was 2.3 days in April, the most recent period measured. It appears to be stabilizing.

“It will likely flatten out at 2.3, 2.4, 2.5,” Bloom said. “I’ve talked to hundreds of employers, and that’s the same message we’re getting. So that triangulates very well.”

But remember: That’s just the national average.

“San Francisco would just look like a more extreme version of this,” Bloom said, because it surpasses many other cities in key traits that foster remote work. With its highly educated workforce and prevalent technology and finance industries, many of its employees can work on a laptop from the comfort of their own couches.

Indeed, a separate, one-time survey that Bloom conducted from January to March of this year found San Franciscans wanted to work remotely 53% more often than they did before the pandemic, outpacing office workers in the other cities studied.

A single commuter exits the Embarcadero BART Station near California and Drumm streets downtown. Jessica Christian / The Chronicle

Those figures stand in sharp contrast with budget projections from the city’s Controller’s Office, which rest partly on the assumption that remote work will normalize at 33%, meaning workers would be in the office two-thirds of the time.

“There’s not a precise calculation that led to our specific estimates,” said Carol Lu, citywide revenue manager for the office. “There is a lot of uncertainty about this projection.”

Her team based its estimate on the level of office attendance that some major employers like Google and Apple were requiring, as well as what smaller employers expected and what experts in the commercial office market were hearing.

Two days per week of telecommuting, or 40%, was the most common answer. The office lowered it to 33% “to account for employees who choose to come into the office more,” Lu said, as well as “financial and legal industries which seemed to expect more days in the office than the technology companies.”

But Lu acknowledged “we don’t know how well hybrid plans will work for companies. We don’t know how telecommuting will evolve over time. We don’t know what employees’ expectations will look like a year from now.”

Bloom, on the other hand, is more certain.

“It’s pretty clear what’s coming,” he said. “The sooner I think we face that, and adjust, the better it will be.”

City revenues may suffer

Over time, multiple tax revenues for City Hall could be at risk: property taxes, from emptied buildings that drop in value; sales taxes, from businesses that are struggling or gone, and others. That could lead to a reduction of public services, Bloom said.

“My biggest fear is the city either has to slash spending on, say, police, or it aggressively puts up taxes on businesses to cover the shortfall and drives them out of the city,” he said.

In March, the Controller’s Office said it expects a budget surplus of $74.7 million over the next two years, based in part on the city’s projections of office-worker returns, federal financial aid and record-high returns on pension investments. But that estimate was revised downward to $15 million last month, in large part due to expected salary increases for public-sector union workers.

Remote work aside, vacant offices — space that is either not leased or leased by an absent tenant who is trying to sublease it to recoup rental costs — are of continuing concern. A record high 20.4 million square feet of San Francisco office space, or roughly 24% of the citywide total, was vacant at the end of the first quarter of this year, according to real estate brokerage firm CBRE.

Vacancies could increase as companies get better at coordinating their hybrid staff, efficiently staggering in-office days so they can permanently reduce their total square footage, Bloom said.

A former Walgreens is one of many deserted storefronts along Kearny Street in the Financial District. Jessica Christian / The Chronicle

Businesses hobbled

The impact on local businesses cannot be overstated. During the pandemic, absent office workers’ earnings stopped flowing to cafes, retail outlets, restaurants and entertainment. Even once office work normalizes, the average worker will still spend an estimated $5,293 less per year in San Francisco, according to joint research by Bloom and economists at the Instituto Tecnológico Autónomo de México and the University of Chicago.

The fallout: Empty, abandoned office and commercial spaces mar the Financial District and surrounding areas. Many of the windows are bannered with signs for leasing opportunities, an odd appeal along these sparsely inhabited streets, where depressed consumer demand is obvious.

On one stretch of Kearny Street between Sutter and Pine, The Chronicle counted 11 closed ground-floor businesses out of nearly 50.

Casualties include neighborhood favorites like Topsy’s Fun House bar and Pachino Pizzeria. At Anthony’s Shoe Service, Gino Gentile is holding on for now. His family has run the business for 56 years, and in the “before times,” Gentile managed a team of five people. Now it’s down to him, and he’s far from turning a profit.

Gino Gentile of Anthony’s Shoe Service looks out the window of his shop on Kearny Street in the Financial District. Gentile now takes clients by appointment only, and has scaled down from a six-person operation to working solo due to reduced clientele Jessica Christian / The Chronicle

“As far as really getting an income? Not an option. Not even close. I’m just living off my savings,” Gentile said. “Eventually, I’m going to have to scale down.”

Some commercial real estate firms say that as interest in opening businesses downtown has dropped, it has risen in other areas of the city.

“We had our best year in 2021,” said Santino DeRose, managing broker at Maven real estate. “The neighborhoods by far, where people lived and worked, came back the fastest.”

Top: a closed sign sits in the window of the former Vision First optometrist now shuttered along Kearny Street. Above: an office building at 181 Fremont St. is seen through an empty Salesforce Transit Center in the South of Market district of San Francisco. Jessica Christian / The Chronicle

Searching for solutions

For city planners, businesses and residents, the question is, what’s to be done?

City officials and business leaders are working together, understanding that unless the city can defy national remote-work trends, its economic core will be forever altered.

“The goal is not to assume that offices and those tenants renting those offices are themselves going to just go back to five days a week in the same size footprint in the office buildings that they were in,” said Kate Sofis, director of the San Francisco Office of Economic and Workforce Development. “I think that’s a permanent change.”

Sofis’ office is working with business leaders to craft a strategy for bringing the economic core back to life. The immediate plan is to hold recurring events like concerts in local bars, restaurants and public spaces to entice office workers and others to the area. Breed has pitched spending $48.9 million over the next two fiscal years on a variety of  pandemic recovery efforts, including events.

As these efforts get under way, Sofis will watch for upticks in tourism and daily commuters into the city, among other key metrics. If, about six months from now, those figures are stalling out, “that’s when we really need to sort of look at bigger guns,” she said, declining to clarify what that might entail.

The city is searching for ideas to bring workers and others back to Financial District streets like Sutter and Kearny, which were emptied by the pandemic. Jessica Christian / The Chronicle

“It’s a bit premature for us to share specifics at this stage,” said Gloria Chan, the office’s director of communications, in a follow-up email. Ideas for new initiatives would result from conversations with the area’s stakeholders, she said, focused on things like keeping streets cleaner, attracting new businesses and encouraging office workers to eat at local restaurants.

Sofis said the six-month timetable might change in response to big environmental upsets, for instance “another significant wave of the coronavirus.”

“You don’t want to be planting something in the ground where the ground is still shifting,” Sofis said. Bloom agrees that there is no rush, citing the uncertainty of the pandemic.

“It seems little,” said UC Berkeley economist Enrico Moretti. “Concerts and events like those are a good idea, but they’re likely to help on the margins. I don’t think they’re going to be transformative.”

If officials are looking for immediate fixes, then Breed should require all municipal workers to fully return to the office, Moretti said. To sweeten the deal, maybe the city could cover those people’s transit costs, he added.

“I’m surprised by how slowly the mayor is bringing back the public workforce,” Moretti said. Requiring a full return would set an example for the private sector, increase BART ridership, “and it would be a shot in the arm for the small businesses that have been struggling for two years.”

In November, Breed required that city staff work on site at least two days per week, though individual departments could demand more — and that is still the policy, said Aliya Chisti, senior policy analyst at the San Francisco Department of Human Resources. Chisti did not directly answer the question of whether Breed could immediately require full-time office attendance. Instead, she said in an email: “The Interim COVID-19 Telecommuting Policy is an addendum to the City’s already existing standard Telecommuting Policy … and will continue for the duration of the local emergency unless ended sooner by the City with reasonable advance notice.”

Data on how many public employees have worked on site during the pandemic “is currently not centralized,” Chisti said, though she estimated it was about two-thirds. The total public workforce is 36,782 people, said Mawuli Tugbenyoh, the department’s deputy director of policy and external affairs.

The owners of Nigella SF on Market Street in the Financial District have to keep one door locked to discourage unwanted intrusions. Jessica Christian / The Chronicle

Public safety a big concern

Any strategy that the city undertakes will have to account for fractious politics and two big, related concerns: homelessness and public safety.

“I hear it all the time, that people don’t feel safe walking around,” said Andy Chun, owner of Schroeder’s restaurant and multiple other businesses in the downtown area, and a board member of the Golden Gate Restaurant Association, which advocates for restaurants’ interests. Chun said he frequently sees “drug abuse, people using the street as a toilet,” though he said he doesn’t personally feel unsafe during the day.

Nancy Oakes, chef and co-owner of Boulevard on Mission Street near the Embarcadero, said the area is a hot spot for car break-ins — it’s happened to her twice — and can feel generally threatening. She recounted an instance in February when a man wandered in off the street and got aggressive with the floor manager.

“The manager approaches him, he gets punched. It happens again. Three guests get up and help remove him from the building,” Oakes said.

“It would be nice if we could feel safer,” said Rubie Kade Campbell, co-owner with James Russell Austin of Nigella SF Botanical Boutique, on Market Street near the Embarcadero. The duo moved into their downtown location during the pandemic, capitalizing on lower commercial rents and hoping to hold out until the streets came back to life and they could grow their clientele from interested passersby. The strategy worked, and orders have risen in recent months.

But with the renewed foot traffic, they must always be ready to react when someone struggling with severe mental illness enters and gets loud and frightens customers.

Nigella SF co-owner Rubie Kade Campbell  and co-owner James Russell Austin have confronted  safety concerns in their recently leased Market Street space. Jessica Christian / The Chronicle

“On any given day, we keep one door locked, and we’re ready to close the other very quickly,” Campbell said, adding that they try to avoid calling the police because they don’t want to land anyone in jail. “We’ve had people kick in our door. It’s hard. We feel for people, but we need to run a business.”

Stanford professor Bloom believes the city should consider using vacant commercial space for new housing that would help address San Francisco’s interminable affordability crisis. It would also create a local clientele to offset the impact of remote work.

“Apart from the transition cost, what’s not to like?” he said. Numerous news stories have detailed the high cost and complexity of conversions. But that only makes it difficult — not impossible.

UC economist Moretti supported the idea of converting work spaces to homes. “I don’t see an enormous downside, and I see all the potential upside,” he said. He cautioned that it wouldn’t immediately breathe life into the city’s core. Even in a hypothetical scenario “that let the property owners switch without any cost tomorrow, it would take many, many years for that to occur.”

Richard Florida, an urban theorist and professor at the University of Toronto, offered a more expansive version of the idea: Yes, downtown should get more housing, but that should include homes for low-income people and give rise to a “15-minute neighborhood.” All of a resident’s needs — work, recreation, groceries, laundry, school for children — should be within a 15-minute walk from their doorstep.

Florida presented the idea in an April meeting with city officials and business leaders. Robbie Silver, head of the Downtown SF Community Benefit District, said he has a forthcoming plan that emphasizes a more walkable downtown. It’s unclear how closely it will follow Florida’s vision.

Whatever plan takes root, the result had better be interesting, Florida said, quoting urban activist and writer Jane Jacobs:

“When a great place gets boring, even the rich people leave.”

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If you want a handy guide to the small-scale interventions that are in vogue these days for urban America — from parklets to pop-ups to cultural programming — a newly released “action plan” for downtown San Francisco is a valuable place to start.

If you also want a document that offers a realistic blueprint for bringing the city’s Financial District back to life, keep looking.

That’s the challenge in trying to gauge the merits of the often-inventive Public Realm Action Plan released this week by Downtown SF, a business nonprofit that provides services to 43 blocks stretching from Jackson Square south past Market Street almost to the Embarcadero.

It’s a smart assessment of how streets and outdoor spaces in the tower-studded terrain could evolve in coming years. It also concedes that, 28 months after we were all told to go home and shelter in place to ward off the coronavirus, barely half of the district’s workforce has returned to their offices.

A pedestrian walks past a building for lease inside a sunken public plaza surrounding One Bush Street at the corner of Market and Sutter streets in San Francisco.

Jessica Christian/The Chronicle

And that’s the problem: what frames negative perceptions of the Financial District right now is empty storefronts and mostly vacant high-rises, not the lack of shady trees or lunchtime concerts.

To their credit, the people behind the plan acknowledge that their vision to activate dormant sidewalks is just one piece of a much larger puzzle.

“This is not going to solve all the issues downtown; we know that,” said Claude Imbault, deputy director of the nonprofit. “This is a tool to start the conversation.”

The plan draws heavily on what’s known in planning circles as tactical urbanism, where the aim is to jump-start an area’s potential with small enticements rather than wait for large-scale investments. The idea is that plenty of people working and living nearby are eager to explore the civic landscape, if they have a reason to do so.

A pedestrian walks past a staircase leading to a sunken public plaza surrounding One Bush Street at the corner of Market and Sutter streets in San Francisco.

Jessica Christian/The Chronicle

Of the six areas targeted by Downtown SF as potential spots to focus on short-term, the so-called Market Oasis gives a taste of what upgrades are envisioned — and the challenge of pulling some of them off.

The oasis would transform the north side of Market between Sansome and Front streets, a concentrated dose of what sets the Financial District apart from other neighborhoods. Ignore the vacant storefronts, look up instead, and the 29-story Shell Building thrusts skyward with 1920s aplomb directly across from One Bush St., 20 stories of bespoke midcentury modern.

For history buffs there’s the Mechanics Monument, a muscle-bound iron celebration of labor by sculptor Douglas Tilden from 1901. The shell of a 1910 banking temple holds one of the district’s most prominent privately owned public spaces, which are required by the city in new commercial development projects.

The action plan would enliven the scene via “an improved experience of significant public spaces” — one that would include colorful tables and chairs, planters filled with flowers and trees, light projections at night and lunchtime concerts or other events throughout the week.

As for the zone’s prominent but empty retail spaces, including a circular pavilion rising from the sunken plaza at One Bush, it’s suggested that a “buzzy lunch spot” could go into one, while “a collection of short-term pop-ups” could fill another. The pavilion is envisioned as holding “a highly visible downtown destination.”

An empty walkway leads through a sunken public plaza surrounding One Bush Street at the corner of Market and Sutter streets in San Francisco.

Jessica Christian/The Chronicle

But the plan is vague on how this happens, much less spell out where the money might come from to jazz things up. The goal instead is to take the plan and its pilot projects — starting with Leidesdorff Street, a short alley that ends at the Transamerica Pyramid — to gauge what interest there might be from building owners and public agencies.

Even if workers were clocking in upstairs at pre-pandemic numbers, there’s no guarantee that “Market Oasis” would magically blossom. The plan envisions a string of buoyant spaces within two short blocks, including the sunken moat-like plaza and the city-owned Mechanics Plaza on the east side of Battery Street, where Tilden’s sculpture resides. There are only so many workers to go around — you can imagine one or two spaces coming alive, but not all of them at once, on an ongoing basis.

So, what happens when the novelty fades? The city’s Public Works department freshened up Mechanics Plaza back in 2014, replacing tattered wooden benches with bright metal street furniture while adding stands for people to recharge cell phones or fill their water bottles. The vitality ebbed within a few years. When I stopped by Monday, a grand total of one person was eating lunch on a granite block next to an empty planter.

The plan’s creators acknowledge that while snappy designs and short-term pop-ups can generate buzz, they aren’t enough.

People eat lunch at the foot of a statue inside Mechanics Plaza along Market Street in San Francisco.

Jessica Christian/The Chronicle

“Whatever we do has to be a campaign,” said Laura Crescimano, whose Sitelab Urban Studio crafted the plan for Downtown SF with John Bela and Fehr & Peers. “These things happen in layers. People want to go to ‘a thing’ that’s a series of things.”

Ultimately, the value of the “action plan” might be as a tool kit to draw on, whether in the Financial District or other commercial districts.

“I appreciate the thoughtful approach they’ve taken … it’s a wonderful resource,” said Kate Sofis, director of the San Francisco Office of Economic and Workforce Development. Her office has the task at City Hall of finding ways to revive the larger downtown scene. “Some of the things they want to do are exactly the things we want to do.”

San Francisco’s Financial District won’t be returned to its bustling heyday by a more humane concept of public space. But small moves can add up — and with luck, some of the ideas offered by Downtown SF will help to move things along.

John King is The San Francisco Chronicle’s urban design critic. Email: jking@sfchronicle.com Twitter: @johnkingsfchron

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The Golden Gate corridor refers to all means of travel between Marin and Sonoma counties to downtown San Francisco.

It’s served by Highway 101 and the Golden Gate Bridge Highway and Transportation District. The world-famous bridge is the most prominent portion of the route. While most travel the corridor by auto, the Bridge District’s bus and ferry services play a major role in facilitating corridor mobility.

I recently spoke with Dennis Mulligan, the district’s general manager. The San Francisco native is one of the top public-sector managers in the Bay Area.

Much work has been accomplished installing a wire rope netting for the state of the art suicide barrier in a project now predicted to cost at least $206 million. It’s expected to be completed in November of 2023. Crews are working 24/7, including double shifts in the evenings. To see an already erected barrier segment, go near the bridge’s northwest end and find the Marin Headlands parking area overlooking the bridge.

In 2021, 223 people tried to commit suicide by jumping off the 1.7-mile span. Of those, 198 were dissuaded due to Bridge District staff’s valiant efforts. The barrier is expected to save 30 lives a year. Past experience indicates of those dissuaded from suicide, few make a second effort whether by jumping, pills, gunshot or other easily available means.

Transit patronage, bridge traffic and related revenue were decimated by the COVID-19 pandemic. When the coronavirus hit in March 2020, most of us were terrorized. The idea of ​​going to a downtown San Francisco office, dining out, meeting friends or attending cultural and recreational events seemed foolhardy.

Bridge traffic immediately decreased by 70%, ferry patronages dropped by 99% and bus ridership declined by 90%.

With the introduction of lifesaving vaccines, the “when” and “how” of work is slowly moving toward a new post-pandemic reality.

Along the corridor, auto traffic within Marin has returned to pre-pandemic levels. Likewise, midday and weekend Golden Gate Bridge auto traffic is back to its pre-pandemic volume. It’s the traditional morning and evening commute that’s dramatically declined, particularly on Monday and Friday.

Twenty percent of San Francisco office space is vacant. The other 80% tends to be underutilized. Office denizens – particularly finance and technology – have multiple workplace options. Many have opted to work from home at least two or three days each week, leaving the old Financial District and South of Market’s high-rise buildings desolate.

That trend is reflected by bus and ferry ridership. Like most urban transit systems, the pillar of Golden Gate ferries and buses was the five-day-a-week peak commute from the suburbs to the city center and back.

On pre-pandemic weekdays, the Golden Gate ferry’s Larkspur to SF Ferry Building route ran 42 trips per day. Mid-pandemic, that was down to 14. Even now, only 22 trips are scheduled.

As Mulligan says, “People are not lining up to go to San Francisco.”

Another example is the Route 4 express commuter bus from Mill Valley to downtown San Francisco. Until early 2020, it made 25 trips a day. The line was terminated during the pandemic. Now, under Golden Gate’s new renumbering scheme, Route 114 makes just four runs each weekday. The decline is similar for all Marin and Sonoma express bus commute routes.

While work habits changed, the recreation-based travel market is returning. That’s reflected on Golden Gate ferry routes from the San Francisco Ferry Building to Sausalito and Angel Island.

If the shift to remote working becomes permanent, its financial impact will be disruptive. Bridge District toll and transit revenue is down by $1 million a week. Even with right-sizing bus and ferry trips to cut costs, Golden Gate was dependent on one-time federal pandemic relief to balance its books.

Until the workplace’s new normal becomes clear, transit management, employees and passengers will have to wait two or three more years to learn how they’ll emerge from the (hopefully) once-in-a-lifetime global epidemic.

Resources: Marin’s suicide prevention and crisis hotline is 415-499-1100. Grief counseling is available at 415-499-1195.

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Smoke plumes filled the air in downtown San Francisco on Thursday evening, as firefighters quickly put out a vehicle fire.

The fire began shortly after 5 pm, as flames covered a turquoise van on the corner of Fifth and Mission streets. It quickly spread to a bus shelter right by where the vehicle was parked.

It was extinguished by 5:25 pm Access to Fifth Street was closed, but vehicles were seen driving on Mission Street.

van on fire right outside of fifth and mission pic.twitter.com/xCmtMzGgFq

— joshua (@joshua_bote) March 11, 2022

It is unclear whether any passengers were inside the vehicle, though San Francisco firefighters were seen using equipment to open the vehicle after the fire was extinguished.

John Baxter, public information officer for the San Francisco Fire Department, said that there were no major injuries, and that the cause of the fire remains under investigation.

A photo of the burned van on Fifth and Mission streets.

Fiona Lee/SFGATE

Elsewhere in the Bay Area, there were at least two separate vehicle fires in Oakland — one on Highway 24 and Broadway Avenue in Oakland that was caused by a vehicle accident, and another on 34th and Wood streets. The latter fire killed two dogs and left three RVs fully burned, KTVU reported.

This is a developing story and will be updated when more information becomes available.

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