San Francisco Faces 'Doom Loop' from Office Workers Staying Home, Gutting Tax Base
Despite our housing crisis, it was years into the COVID pandemic before our leaders meaningfully questioned the logic of reserving some of the most prized real estate on Earth for fickle suburbanites and their cars. Downtown, after all, was San Francisco's golden goose. Companies in downtown offices accounted for 70% of San Francisco's pre-pandemic jobs and generated nearly 80% of its economic output, according to city economist Ted Egan. And so we wasted generous federal COVID emergency funds trying to bludgeon, cajole and pray for office workers to return downtown instead of planning for change. We're now staring down the consequences for that lack of vision.
The San Francisco metropolitan area's economic recovery from the pandemic ranked 24th out of the 25 largest regions in the U.S., besting only Baltimore, according to a report from the Bay Area Council Economic Institute. In the first quarter of 2023, San Francisco's office vacancy rate shot up to a record-high 29.4% — the biggest three-year increase of any U.S. city. The trend isn't likely to end anytime soon: In January, nearly 30% of San Francisco job openings were for hybrid or fully remote work, the highest share of the nation's 50 largest cities. Amid lower property, business and real estate transfer taxes, the city is projecting a $728 million deficit over the next two fiscal years. Transit ridership remains far below pre-pandemic levels. In January, downtown San Francisco BART stations had just 30% of the rider exits they did in 2019, according to a report from Egan's office. Many Bay Area transit agencies, including Muni, are rapidly approaching a fiscal cliff.
San Francisco isn't dead; as of March, it was home to an estimated 173 of the country's 655 companies valued at more than $1 billion. Tourism is beginning to rebound. And new census data shows that San Francisco's population loss is slowing, a sign its pandemic exodus may be coming to an end. But the city can't afford to wait idly for things to reach equilibrium again. It needs to evolve — quickly. Especially downtown. That means rebuilding the neighborhood's fabric, which won't be cheap or easy. Office-to-housing conversions are notoriously tricky and expensive. Demolishing non-historic commercial buildings that no longer serve a purpose in the post-pandemic world is all but banned. And, unlike New York after 9/11, San Francisco is a city that can't seem to stop getting in its own way.
