The city of San Francisco is about to be known for something else besides being a receptacle for human feces, though if we’re being honest, it’s barely an improvement. There is an empty office space crisis that is so massive that it could take almost 20 years to recover and get things back to where they were before the COVID pandemic hit, according to new data.
Back in 2019, according to Yahoo, the vacancy rate in San Francisco was well under 10 percent. However, the restrictions that arose during the pandemic, coupled with increasing work-from-home trends, layoffs, and spikes in prices have increased the rate over thirty percent.
Office spaces that once belonged to Uber, Salesforce, Twitter, Reddit, and Pinterest have drastically downsized or sought to vacate their buildings as remote working becomes more desirable and layoffs sweep the industry.
At the rate the vacant square footage is currently being absorbed, Avison Young – a global real estate company – says 18 years is the “worst case scenario” to get levels back to pre-pandemic levels, according to the San Francisco Chronicle.
A more positive outlook believes it will only take around five years in order to reduce the vacancy rate back down to 12 percent. Is this positivity or delusion? Sometimes it’s hard to tell the difference. I mean, I don’t see how in the world you’re going to drop this figure when homeless people are literally dropping turds on the sidewalk in public in front of businesses. Why would professionals want to have to travel to an office building for work and essentially play a weird, twisted version of real life Frogger in order to avoid stepping in poop? Thanks, but no thanks.
Especially when they can do the same job from home.
And let’s face it. If you can have the vast majority of your employees work from home and yield the same, if not better results, why would you want to spend the capital to rent an office space?
Without staff to occupy large office spaces and most companies adopting permanent work-from-home policies, reducing the amount of office space is an obvious choice.
But as a result of the abandoned buildings, San Francisco’s problems become exasperated. Without commuters to use public transportation and contribute to the local economy, it becomes more difficult for the city to maintain its desirable features like the BART transit system and for local businesses to stay open. Empty streets have heightened the homelessness crisis too. However, some people have suggested converting the empty office spaces into housing as a solution.
But there is hope, Avison Young and CBRE – another global commercial estate firm – believe the vacancy rate will level out thanks to the rise of AI tech companies and lower commercial rental prices.
However, part of the hope being presented is to simply set a lower expectation for the vacancy rate of the city, Alexander Quinn, the director of research for Northern California at JLL Brokerage said to The Chronicle.
“We think that San Francisco is going to be more akin to markets like Chicago and Austin, which have higher vacancy rates historically, with a lot of buildings that are just structurally obsolescent, and those buildings will have higher vacancy than a cohort of more competitive buildings,” Quinn explained.
He went on to provide an estimate for the city’s natural vacancy rate, which he believes is between 12 and 14 percent, predicting things will level out within a decade.