In a series of tweets last year, Elon Musk commented on the state of San Francisco, where his social media company X, formerly known as Twitter, is based. He began by saying, “Many have offered X (formerly Twitter) generous incentives to move its headquarters out of San Francisco.”

He also said that many expect his company to move out of the city, but even though San Francisco is “in a vicious spiral of one company after another moving out,” X will not be moving its headquarters.

He added: “You only know who your true friends are when the going gets tough. San Francisco, beautiful San Francisco, even if others leave you, we will always be your friend.”

Do not miss:

The next day, Musk stressed that the city would not survive unless more people came to work in San Francisco. This seems to have struck a chord with many people, with numerous commentators adding that the city was “a lost cause; it's run by prisoners,” “nobody wants to live there,” and “nobody can afford San Francisco.”

A month later, Marc Benioff, co-founder and CEO of Salesforce CRMtweeted that his company was staying and that a third of AI companies are headquartered there. Musk responded: “That's great! It's very important that people come to the office, otherwise the shops, restaurants, etc. cannot stay in business.”

Tendency: Executives and founders of Uber, Facebook and Apple are bullish on this wellness app you can invest in at $1.15 per share.

San Francisco has been on tough times lately, prompting Elon Musk to tweet again. The COVID-19 pandemic has hit San Francisco hard, resulting in the closure of many businesses and fewer tourists.

In addition, many companies now allow their employees to work from home, meaning fewer people commute into the city for work. This hurts local businesses that rely on these day laborers and visitors. Musk is also a vocal opponent of the work-from-home movement, even calling it “morally wrong.”

The city has become expensive in the last five to ten years. Rents and housing prices have skyrocketed and the cost of living has increased significantly.

Another major problem is homelessness. More and more people are living on the streets and the city is struggling to provide adequate assistance. Makeshift shelters and tents are commonplace, raising concerns about safety and cleanliness.

Finally, crime is also a problem. With theft and violent crime on the rise, people and businesses are concerned about their safety and many are considering moving to safer areas. Everyday items in shops are now locked behind glass doors, making the crime problem even more visible to locals and visitors.

A series of so-called flash burglaries has led many people to leave their cars unlocked to prevent their windows from being smashed.

Because of these combined problems, it feels like San Francisco is in a downward spiral.

Continue reading:

The post ‘The Metropolis Is In A Doom Spiral’ Says Elon Musk However Will not Transfer Twitter Out Of San Francisco – Salesforce (NYSE:CRM) appeared first on DAILY SAN FRANCISCO BAY NEWS.

“The city is in a downward spiral,” says Elon Musk, but does not want to move Twitter from San Francisco

In a series of tweets last year, Elon Musk commented on the state of San Francisco, where his social media company X, formerly known as Twitter, is based. He began by saying, “Many have offered X (formerly Twitter) generous incentives to move its headquarters out of San Francisco.”

He also said that many expect his company to move out of the city, but even though San Francisco is “in a vicious spiral of one company after another moving out,” X will not be moving its headquarters.

He added: “You only know who your true friends are when the going gets tough. San Francisco, beautiful San Francisco, even if others leave you, we will always be your friend.”

Do not miss:

The next day, Musk stressed that the city would not survive unless more people came to work in San Francisco. This seems to have struck a chord with many people, with numerous commentators adding that the city was “a lost cause; it's run by prisoners,” “nobody wants to live there,” and “nobody can afford San Francisco.”

A month later, Salesforce (NYSE:CRM) co-founder and CEO Marc Benioff tweeted that his company was staying put and that a third of all AI companies are headquartered there. Musk responded: “That's great! It's very important that people come to the office or the stores, restaurants, etc. cannot stay in business.”

Tendency: Executives and founders of Uber, Facebook and Apple are bullish on this wellness app you can invest in at $1.15 per share.

San Francisco has been on tough times lately, prompting Elon Musk to tweet again. The COVID-19 pandemic has hit San Francisco hard, resulting in the closure of many businesses and fewer tourists.

In addition, many companies now allow their employees to work from home, meaning fewer people commute into the city for work. This hurts local businesses that rely on these day laborers and visitors. Musk is also a vocal opponent of the work-from-home movement, even calling it “morally wrong.”

The city has become expensive in the last five to ten years. Rents and housing prices have skyrocketed and the cost of living has increased significantly.

Another major problem is homelessness. More and more people are living on the streets and the city is struggling to provide adequate assistance. Makeshift shelters and tents are commonplace, raising concerns about safety and cleanliness.

The story goes on

Finally, crime is also a problem. With theft and violent crime on the rise, people and businesses are concerned about their safety and many are considering moving to safer areas. Everyday items in shops are now locked behind glass doors, making the crime problem even more visible to locals and visitors.

A series of so-called flash burglaries has led many people to leave their cars unlocked to prevent their windows from being smashed.

Because of these combined problems, it feels like San Francisco is in a downward spiral.

Continue reading:

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This article “The city is in a downward spiral,” says Elon Musk, but doesn't want to move Twitter out of San Francisco, originally appeared on Benzinga.com

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

The post ‘The Metropolis Is In A Doom Spiral’ Says Elon Musk However Will not Transfer Twitter Out Of San Francisco appeared first on DAILY SAN FRANCISCO BAY NEWS.

Good morning It's Thursday, January 18th. Here's what you need to know to start your day.

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Is San Francisco really doomed? Depends on who you ask

Let's start with what most people agree on: The pandemic has hit cities hard – and San Francisco especially hard.

Many workers in the city's bustling tech sector traded their downtown office for a desk in a house with lower rent and more space outside the city — or out of state. The exodus set off a chain reaction that affected the cafes, restaurants and other businesses that relied on downtown foot traffic.

Then came the headlines about a city in a state of decline. And the conservative right's narrative of a failed city filled with homelessness, open drug use and crime that can only be attributed to their own liberal policies.

But the city still has its defenders. They sense a comeback, claiming that “alternating between upswings and downswings is simply a natural part of San Francisco's rhythm,” Times Bay Area and North Shore reporter Hannah Wiley wrote this week.

The next boom they're eyeing: artificial intelligence.

“Several tech leaders interviewed — some who have spent decades in Silicon Valley, others are newcomers to the region — argue that San Francisco and the broader Bay Area continue to be a thriving nerve center of talent, institutional knowledge and abundant venture capital,” Wiley reported.

It's not just optimistic technicians. Wiley pointed to some recent data that challenges the downward spiral narrative.

First, more people are moving to San Francisco and neighboring Bay Area counties than are moving away. This is notable because the state of California has lost more residents overall in recent years than it has gained. Housing costs have also fallen.

And it's always smart to keep your eye on the money, like Wiley did.

“According to an October report from Ernst and Young, the Bay Area maintained its top spot nationally for venture capital investment last year, followed by Boston and New York, thanks in part to investments in artificial intelligence,” she noted.

There may be some positive signs for technology, but the recovery from the pandemic hasn't been great for everyone. The city continues to lose one population group: people aged 25 and over without a university degree.

Some people Wiley spoke with expressed more caution about the city's future, citing high office vacancy rates and reduced on-site employee attendance.

“Downtown was a pretty rich ecosystem before the pandemic. But at its core, it was about people coming to work in offices,” Ted Egan, San Francisco’s chief economist, told her. “Until you get that back, it will be difficult to get a positive dynamic going again in the city center.”

Still, some feel that the city is slowly but surely entering a new era.

Here's a bright spot (or maybe a weak spot?) that particularly caught my eye: the revitalization of United Nations Plaza into a skateboarding destination. If you're looking to bring fresh energy to an urban core, skateboarding might be just the ticket.

You can read more from Wiley about optimism in San Francisco.

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Beverly Hills is facing a moratorium on building permits after a judge ruled that the city does not have a state-approved affordable housing plan.

(Gary Coronado/Los Angeles Times)

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(Francine Orr/Los Angeles Times)

Lions, tigers and a monkey in a bulletproof vest: get to know Mexico's exotic pets. In Sinaloa, Mexico, home to one of the world's most powerful drug cartels and famous for its displays of wealth, people are in search of exotic animals.

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For your time out

Geothermal water flows into a lake at Murrieta Hot Springs Resort. The site is a geothermal spa with a history dating back more than a century. For nearly 30 years, the property served as a Bible school and Christian retreat center. The property was sold in 2022 and the new owners renovated the property to open it to the public.

(Myung J. Chun / Los Angeles Times)

Go out

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And finally… from our archives

On January 18, 1994, the Los Angeles Times devoted the front page to coverage of a magnitude 6.7 quake in Northridge that ultimately left more than 9,000 injured, 60 fatalities, and up to $20 billion in property and economic damage This resulted in losses of $40 billion.

(Los Angeles Times)

Here's the front page of the Times, 30 years ago today. After the magnitude 6.7 Northridge quake killed 60 people and damaged much of the county, radio broadcasts and newspapers were one of the few sources of information residents had. The Times published its story the day after the earthquake and continued publishing as Los Angeles began to recover. This week, Times news and culture critic Lorraine Ali wrote about survival in Northridge, noting, “The sound of newspapers being thrown onto driveways provided a semblance of normality in the chaos.”

Have a great day, the Essential California team

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Check out our top stories, topics and latest articles on latimes.com.

The post San Francisco: Some say rumors of “doom loop” are exaggerated appeared first on DAILY SAN FRANCISCO BAY NEWS.

• KPMG is set to move out of its $400 million namesake building as the city’s ‘doom loop’ continues to batter its downtown region
• It comes as shoe store Alto also prepares to exit San Francisco Centre, the city’s biggest mall, next week
• Nearly 100 retailers in downtown San Francisco have closed since the start of the pandemic, a decline of more than 50 percent, according to a recent report 

Accounting firm KPMG is set to move out of its $400 million namesake building, another high-profile exit from San Francisco’s beleaguered downtown.

The consulting and accounting giant first leased space in the 25-story office tower when the building opened in 2002.  Its name hangs above the entry to the skyscraper where the company currently occupies more than 100,000 square feet. 

It comes as shoe store Alto prepares to exit San Francisco Centre, the city’s biggest mall, next week.

Businesses and residents have fled downtown San Francisco since the pandemic with groups blaming crime, homelessness and work-from-home keeping people from downtown. 

Nearly 100 retailers in downtown San Francisco have closed since the start of the pandemic, a decline of more than 50 percent, according to a recent report. 

KPMG is set to move out of its $400 million namesake building after two decades in downtown San Francisco Nordstrom have recently moved out of the city’s downtown contributing to a loss of footfall

KMPG, a large accounting and financial firm, originally took 90,000 square feet at 55 Second St. in a 10-year contract, marking the second-largest office deal of 2003.

It has since grown its footprint to span nearly one-third of the 380,000-square-foot building, leading to it being widely known as ‘The KPMG Building’.

The company is now considering ending its two-decade-long relationship with the building, according to the San Francisco Chronicle. It’s the latest tenant looking to exit the downtown area. 

Now, another business is set to leave the area’s largest shopping center as Aldo moves its store from the San Francisco Centre. The mall lost Adidas last Saturday, as well as other recent losses including Hollister, Lego and J. Crew. 

The mall lost $910 million between 2016 and 2023, with half the rental space now empty, according to an appraisal published last month.

Its owners lost control of the 5-million-square-foot retail and office complex to lenders last year. 

The high-profile closures and exits suggest San Francisco’s ‘doom loop’ is far from over. A doom loop is where a city loses its tax base and can’t afford improvements needed to fix the situation to bring new businesses and residents back to an area. 

The city’s downtown has suffered from the proliferation of homeless encampments, open-air drugs markets and rampant theft. 

Hordes of brand names, including the likes of Whole Food and Nordstrom, that have recently moved out contributing to a loss of footfall that then drives out other businesses.

The city has also struggled for years with rampant fentanyl use and fatal overdoses. 

Nearly 100 retailers in downtown San Francisco have closed since the start of the COVID pandemic, a decline of more than 50 percent, according to a recent report The city’s downtown has suffered from the proliferation of homeless encampments, open-air drugs markets and rampant theft The city has also struggled for years with rampant fentanyl use and fatal overdoses

In the first five months of 2023, preliminary reports show there were 346 overdose deaths in the city – an increase of more than 40 percent from the same period in 2022.

Economists have warned the city is spiraling into an ‘urban doom loop’ – a vicious circle of interconnected trends and forces that send cities into economic and social ruin.

High theft has proved a problem in the area recently, with a Walgreens in the city center resolving to chaining their freezers to stop shoplifters.

Retail stalwart Old Navy announced they would be shuttering their flagship store in the area last month.

Anthropologie and Office Depot have also made the same decisions.

These stores joined the growing list of stores that have abandoned the coastal city, including H&M, Marshall’s, Gap and Banana Republic.

A disturbing recent report showed 95 retailers in downtown San Francisco have closed since the start of the COVID pandemic, a decline of more than 50 percent.

Out of 203 retailers open in 2019 in the city’s Union Square area, just 107 are still operating, a drop of 47 percent in just a few pandemic-ravaged years.

The post KPMG transferring out of $400million ‘KMPG constructing’ in downtown San Francisco with close by besieged mall loses one other tenant as doom loop continues to see residents and companies flee liberal-led metropolis appeared first on DAILY SAN FRANCISCO BAY NEWS.

SAN FRANCISCO – Gophers big man Pharrel Payne watched from the bench as the starters struggled to open Sunday’s 76-58 loss against San Francisco, trailing 10-1 in the first four minutes.

After the 6-9 sophomore entered the game, the Gophers finally scored their first field goal when the threat of Payne inside allowed leading scorer Dawson Garcia to get more open looks.

The Gophers (4-2) never recovered after falling behind in the first half Sunday and trailed from start to finish against the Dons (5-2) at the Golden State Warriors’ Chase Center. One of the few bright spots, though, was Payne scoring 15 of his team’s 31 points off the bench in the loss.

It was the first time this season Payne played more than 20 minutes after the Gophers had him on a minutes restriction to help with a lingering foot injury to open the season.

“Hopefully I can carry it over to other games,” Payne said Sunday. “I feel like I’m definitely getting more comfortable on the court. Definitely out there making my mark. It’s been a little tough, but I know it’s for my own good.”

Payne’s performance was one of the four things learned from Sunday’s loss in San Francisco:

Progressing Payne

There was heavy enthusiasm within the program this offseason that Payne was going to make a significant jump, but with his foot injury came a setback.

After starting at center in the opening win vs. Bethune-Cookman, Payne would miss the second game of the season against Texas San Antonio. He had seven blocks combined in the next two games after returning, but the Gophers limited him to just 15 minutes a game.

At less than 100% healthy, Payne was even being cautious with his foot in practice, but he looked more like his old self Sunday with season-highs in points (15), rebounds (six) and minutes (26).

“I feel like the last game his mentality was right,” Gophers coach Ben Johnson said. “There was a fight to him. He was moving. He showed that energy, which I love. So, we need him to continue that mental piece because that’s really big for him. Hopefully he can build on the success he had.”

Payne’s more productive the more he plays. He’s averaging a career-best 20.2 points, 9.4 rebounds and 4.7 blocks, per 40 minutes this season.

Turnover issues

The Gophers are the most turnover-prone team in the Big Ten this season — and it has become arguably their biggest weakness.

The 18 turnovers Sunday turned into 25 points for the Dons, who also recorded 14 steals on the night. Four of the team’s eight turnovers came from point guard Elijah Hawkins in the first half, but taking care of the ball got worse for others as the game progressed.

Mike Mitchell Jr. and Cam Christie combined for six of the team’s 10 turnovers in the second half. Minnesota’s point guard trio of Hawkins, Mitchell and Christie crumbled under USF’s pressure to combine for 12 turnovers in the game.

Through six games, the Gophers lead the Big Ten with 14.7 turnovers per game and rank last in the league in turnover margin (minus-4.5).

“We have to fix that,” Johnson said. “That’s been our Achilles’ heel. Eighteen turnovers is way too many, especially playing against a really good team. We have to figure out and understand the value of hitting singles and making the simple play.”

Defensive letdown

Defense became a bigger part of the U’s identity after the first loss earlier this month against Missouri, but it didn’t travel well.

In the first road game of the year, Johnson saw the Gophers have their worst defensive showing of the season by allowing USF to shoot 52% from the field, including 60% in the second half.

The Dons were not only bigger — they played with a 7-2 center and 6-8 guard at times — but also more aggressive defensively than their Big Ten foe Sunday. They had seven players 6-7 or taller on the floor throughout the game, including 6-8 Jonathan Mogbo, who finished with a career-high 21 points and 10 rebounds.

Nothing in transition

The Dons were able to beat the Gophers at their own game on Sunday night.

Entering Sunday, Johnson’s new, fast-paced style of play averaged 14 fastbreak points per game this season, including a 24 against UTSA earlier this season.

USF’s defense forced a season-high in turnovers. The Gophers played much faster than they could handle but also were outscored 10-1 in fastbreak points. It was the first time this season they weren’t able to score one basket in transition.

The post Pharrel Payne shifting higher, Gophers’ turnovers spell doom appeared first on DAILY SAN FRANCISCO BAY NEWS.

Imagine a negative economic spiral that begins with office workers leaving their jobs in central business districts to become remote employees. As office buildings empty, companies close their offices or move their downtown locations to cost-friendly suburbs.  Without workers filling the urban core, nearby retail businesses and restaurants close due to the lack of customers.

These factors result in declining municipal tax revenues, forcing the local government to offer fewer services. And the decline in amenities, coupled with cutbacks in city services, forces residents to abandon downtown neighborhoods.

“Workers and corporate leaders alike are beginning to realize that sprawling offices, especially in expensive city centers, are no longer as necessary.”

While such an urban nightmare may sound unlikely, three university business professors write that there is a risk of a version of this scenario occurring. The team of Arpit Gupta at New York University and Vrinda Mittal and Stijn Van Nieuwerburgh at Columbia University have coined this scenario as the “urban doom loop,” and they detailed it in their recent paper, “Work From Home and the Office Real Estate Apocalypse.”

The urban doom loop involves a series of interconnected events that can lead to economic declines in commercial real estate and beyond. As companies reevaluate leases or withdraw from them, vacancy rates increase and landlords face challenges in securing new tenants. This results in decreased property values and potential mortgage defaults. The ensuing economic downturn affects local tax revenues, stifles consumer spending and triggers layoffs, thus creating a cycle of economic hardship.

Far-reaching consequences

The landscapes of commercial real estate and commercial mortgages are undergoing significant transformations, driven in large part by the aftermath of the COVID-19 pandemic and the accelerated adoption of remote work. The emergence of the doom loop, characterized by the potential spiral of economic challenges in commercial real estate, has economists and business experts concerned about the implications for large and midsized cities along with the financial stability of lenders.

Definition

‘Urban Doom Loop’

A downward economic spiral triggered by remote work, which makes office towers less valuable and results in reduced city tax revenues. This begins a domino effect in which workers who no longer need to live in a city leave for cheaper housing, causing retail businesses to shutter. City services such as police and utilities are reduced by the cash-strapped municipality, causing even more residents to leave the downtown core.

Source: The New York Times

The pandemic has led to a seismic shift in how companies view office spaces. Workers and corporate leaders alike are beginning to realize that sprawling offices, especially in expensive city centers, are no longer as necessary.

Major corporations such as Salesforce are paring back their office footprints as remote work remains attractive, leading to concerns about declining occupancy rates. This trend, coupled with reduced demand for office space, has far-reaching consequences for the commercial real estate market.

According to consulting company Buildremote, 77% of the Fortune 100 companies operate on a hybrid work schedule, while 30% of these companies have announced reductions to their office-space footprints since 2020. Also, 13% of Fortune 100 firms do not require employees to have any scheduled office visits during a given week.

These large companies have traditionally been major driving forces of downtown office usage. With these firms reducing their office-space needs and having no plans to require workers to return to the office, the first major step in the urban doom loop may be starting for many cities.

Risk factors expand

While attention has been drawn to major cities such as New York and San Francisco, midsized cities are also at risk due to their limited capacity to absorb economic shocks. Unlike metro areas with diverse economic streams, midsized cities often heavily rely on one or two key industries. Consequently, the departure of a major tenant or a decline in property values can severely impact these cities’ revenues and employment prospects.

Not every city is equally at risk. Those with a high concentration of office space but relatively little residential space are more in danger. Those that are concentrated on one industry or have a small number of employers taking up a high percentage of downtown real estate also have an increased risk because other businesses or industries are less likely to absorb excess space. Also, cities that have poor transportation options (both public and private) will have a harder time avoiding this vicious cycle.

Some cities, including Provo, Utah; Boise, Idaho; and Austin have a more resilient core given that large portions of office space are utilized by a diversified combination of government agencies, higher education facilities, private corporations and nonprofit organizations. These are also locations where residents want to live, making them less likely to join the municipalities that suffer due to an exodus from the city center.

The urban doom loop has yet to fully materialize, but warning signs are evident. Midsized cities are experiencing higher office delinquency rates and lower occupancy rates compared to larger metros. The trend could intensify as loans are due for refinancing, a situation that is anticipated to unfold over the next 12 to 24 months. The looming deadlines for commercial mortgage maturities could most acutely impact regional banks, which hold a significant portion of commercial real estate debt.

Overcoming difficulties

For commercial mortgage brokers, the path forward is somewhat opaque as interest rates have reached a point where the bid-ask spread is often too wide for buyers and sellers to close deals. Furthermore, for many properties, refinancing may not be an option as injecting more equity may not be feasible. Instead, many of these properties will be foreclosed upon by their respective lenders.

There are three areas in which commercial mortgage lenders and their broker partners can seek to weather the storm and possibly emerge even stronger. The first is to perform thorough surveillance and loss-mitigation efforts on portfolios and individual assets. By conducting stress-test scenarios at the property and portfolio levels, brokers can focus on loan workouts with many types of clients and lender partners.

The second step is to take advantage of gap equity financing programs. These are private loans that cover the gap between another loan and the total cost of a project. Whether through affiliated subsidiaries or joint-venture partnerships, lenders that continue to make market-rate loans and offer gap equity financing — also known as a bridge loan — have the highest probability of successful closings.

The third point is flexibility. Lenders and their broker colleagues who display patience, creativity and common sense on loan restructuring efforts will build plenty of goodwill with their borrowers, even after the market improves.

Conversion problems

The Federal Reserve recognizes commercial real estate as a risk to economic stability. The central bank’s recent efforts to control inflation through higher interest rates impact demand for loans and investments. In turn, this affects the broader economy and contributes to the challenges faced by the commercial real estate sector.

The decline in demand for office space is expected to impact other sectors of the commercial real estate market, such as retail, industrial and multifamily properties. Property owners are attempting to repurpose vacant offices into alternative spaces such as apartments, kitchens or spas. But such solutions are often costly and haven’t gained widespread traction. The transformation of office space is influenced by various factors, including location and property type.

Converting offices to residential buildings is expensive for a variety of reasons. For example, living spaces require natural light. The shape of an office building frequently doesn’t allow light to penetrate to an inner residence. Plumbing and electrical requirements for office buildings and apartments are also much different.

Another part of the problem is companies fleeing downtown areas. Where will these urban residents work? The number of people who live in these buildings is significantly smaller than the number of people who work in an office building. Their commercial needs are different, meaning that turning offices into apartments might not offer the same consumer support to existing retail stores.

While some commercial properties, particularly those in prime locations, may weather the storm better than others, the market is expected to see discounted rents and sales prices, especially for older assets. The repurposing of office space may also play a crucial role in determining the value and viability of other commercial properties.

This is a problem that needs creative solutions. Some answers might be found in places where office buildings are shifting to new industries rather than remaining empty. For example, insurance company Humana occupies a large amount of downtown office space in Louisville, Kentucky. When the company recently downsized, it donated one of its buildings to the University of Louisville to support the school’s Health Equity Innovation Hub. Other corporations may learn from Humana’s actions and find creative ways to reuse unwanted space.

● ● ●

Commercial real estate is in a current state of flux that is shaped by the dynamics of remote work, economic uncertainties and changing consumer behaviors. The concept of the urban doom loop underscores the interconnectedness of factors that can trigger an economic spiral in this sector and beyond.

While the worst-case scenario of declining asset values, lost jobs and failed city centers is not guaranteed, the signs are compelling enough to warrant attention from economists, policymakers and industry stakeholders. As commercial real estate navigates these challenges, innovation, adaptation and strategic planning will be needed to weather the storm and seize opportunities for revitalization and growth. ●

• Tim Wolski is a marketing leader with more than 25 years of experience. He currently serves as an adjunct professor at Bryant University, where he teaches new product development and entrepreneurial marketing. Wolski is passionate about making a meaningful impact. He stays ahead of marketing trends, ensuring his students and the companies that he works for deliver impactful, consumer-focused and data-driven marketing campaigns. Reach Wolski at (401) 965-2615.

  View all posts

• 

  James Gosse is a commercial real estate technology thought leader with more than 20 years of experience in negotiating commercial property sales. Gosse is a co-founder and senior adviser at OakEx, an online marketplace for commercial real estate. Gosse is driven by his passions for technology and commercial real estate, and he has been instrumental in the development of numerous online commercial real estate marketplace platforms and related businesses.

  View all posts

The post Perceive the ‘City Doom Loop’ appeared first on DAILY SAN FRANCISCO BAY NEWS.

Other high-profile losses include Whole Foods, Amazon Go, and Office Depot. The shrinking retail scene has contributed to a general real estate slump as large tech companies have also downsized, with the city estimated to have 18 million square feet of empty office space as of June.

However, despite the talk of San Francisco’s “doom loop,” many businesses have chosen to stay — and some are even moving into the Golden City’s vacant downtown storefronts.

The brands expanding and moving in

“As a new neighbor in the community, we are working to contribute and create a comfortable and welcoming environment,” a spokesperson for Ikea US told Insider, adding that Ikea has had stores in the Bay Area since 2000.

They continued, “We are excited to strengthen our presence in San Francisco and intend to test and try different formats to meet the needs of our San Francisco consumers for many years.”

Chanel is also making moves in downtown San Francisco. The luxury fashion brand moved from a smaller location in the city after purchasing a three-story building at 340 Post Street, across from Union Square, for $63 million, the Real Deal reported. Chanel did not respond to Insider’s request for comment.

Its parent company, Gap Inc, has been closing other locations in San Francisco. These include its downtown Old Navy site in July and its Athleta store on Sutter Street. But this isn’t unique to the city. The clothing giant has been shutting stores across the country in a bid to cut costs as it grapples with declining sales.

A spokesperson for Gap told Insider that the company was committed to San Francisco and had deep roots there.

“It’s where we were founded and the region where thousands of our team members still live and work today,” they said.

“We recently invested in renovating our Downtown San Francisco hub where our teams come together to develop new consumer experiences and product innovations. As part of that remodel, we opened four new stores at our headquarters,” they added.

AI boom boosts city

Fintech startup Brex decided to close its San Francisco office and switch to remote working during the pandemic but reopened a San Francisco location earlier this year to cash in on the opportunities offered by the AI boom.

“Our cofounder and co-CEO, Henrique Dubugras, was really excited by what he saw as going on in the Bay Area with regards to AI and how big of an opportunity it was going to be,” Michael Tannenbaum, Brex’s COO, told Insider. “So we wanted to get closer to that.”

He said that the sheer density of talent and innovation in San Francisco meant the city remained an ideal place for startups to develop.

“It’s a forward-thinking town,” Tannenbaum said. “It’s always been somewhere where a lot of trends have started – it’s just a place where ideas can get off the ground.”

Angela Hoover, the CEO and cofounder of Andi, an AI search-engine startup, moved the company to San Francisco earlier this year.

“Andi was initially based in Miami, which has a growing, vibrant startup scene. But increasingly, the heart of AI seemed to be beating in the Bay Area,” she told Insider.

The move has been enormously beneficial for the company, Hoover said, as it allowed Andi to accelerate its product development and has made hiring easier.

“It was a great decision,” Hoover said. “For an AI startup, there’s no better place to be right now than in San Francisco.”

The post These retailers are bucking the pattern and opening shops in San Francisco regardless of the town’s ‘doom loop’ appeared first on DAILY SAN FRANCISCO BAY NEWS.

• Some retailers are fleeing San Francisco as fears grow over rising crime and a worsening economic environment.
• Nordstrom, Whole Foods, and Anthropologie have all closed locations in the city in the past year.
• Many retailers are staying put and are even expanding their presence.

San Francisco is in the middle of a retail exodus.

The city has seen a number of high-profile businesses close locations in recent months, as fears over crime, soaring rents, and a worsening economic environment have grown.

The most recent exit was Nordstrom, which closed the doors of its five-story department store in Westfield San Francisco Centre in August, citing falling foot traffic and the “changing dynamics” of downtown San Francisco.

Other high-profile losses include Whole Foods, Amazon Go, and Office Depot. The shrinking retail scene has contributed to a general real estate slump as large tech companies have also downsized, with the city estimated to have 18 million square feet of empty office space as of June.

However, despite the talk of San Francisco’s “doom loop,” many businesses have chosen to stay — and some are even moving into the Golden City’s vacant downtown storefronts.

The brands expanding and moving in

Swedish furniture chain Ikea opened a new branch in San Francisco’s Mid-market area in August, occupying a 52,000-square-foot location as part of its strategy to open smaller stores in city centers.

“As a new neighbor in the community, we are working to contribute and create a comfortable and welcoming environment,” a spokesperson for Ikea US told Insider, adding that Ikea has had stores in the Bay Area since 2000.

They continued, “We are excited to strengthen our presence in San Francisco and intend to test and try different formats to meet the needs of our San Francisco consumers for many years.”

The entrance of Ikea’s new San Francisco store. Tayfun Coskun/Anadolu Agency via Getty Images

Chanel is also making moves in downtown San Francisco. The luxury fashion brand moved from a smaller location in the city after purchasing a three-story building at 340 Post Street, across from Union Square, for $63 million, the Real Deal reported. Chanel did not respond to Insider’s request for comment.

Another French luxury brand, Yves Saint Laurent, doubled its space in Union Square last year by leasing three floors of the I. Magnin & Co. building. The move came despite luxury stores in downtown San Francisco being targeted by a series of high-profile robberies.

And luxury jewelry brand Van Cleef & Arpels opened its first standalone location in Union Square in 2022.

A Banana Republic store at Gap’s San Francisco headquarters. Jay Watson

Other chains, such as Banana Republic, are downsizing but staying in the area.

Its parent company, Gap Inc, has been closing other locations in San Francisco. These include its downtown Old Navy site in July and its Athleta store on Sutter Street. But this isn’t unique to the city. The clothing giant has been shutting stores across the country in a bid to cut costs as it grapples with declining sales.

A spokesperson for Gap told Insider that the company was committed to San Francisco and had deep roots there.

“It’s where we were founded and the region where thousands of our team members still live and work today,” they said.

“We recently invested in renovating our Downtown San Francisco hub where our teams come together to develop new consumer experiences and product innovations. As part of that remodel, we opened four new stores at our headquarters,” they added.

AI boom boosts city

AI startups are giving San Francisco a much-needed boost. The city is home to 11 of the top 20 AI companies in the US, data from VC firm NFX, which was shared with Insider, showed. Many of these companies are hunting for office space.

Fintech startup Brex decided to close its San Francisco office and switch to remote working during the pandemic but reopened a San Francisco location earlier this year to cash in on the opportunities offered by the AI boom.

San Francisco skyline. Alexander Spatari/Getty Images

“Our cofounder and co-CEO, Henrique Dubugras, was really excited by what he saw as going on in the Bay Area with regards to AI and how big of an opportunity it was going to be,” Michael Tannenbaum, Brex’s COO, told Insider. “So we wanted to get closer to that.”

He said that the sheer density of talent and innovation in San Francisco meant the city remained an ideal place for startups to develop.

“It’s a forward-thinking town,” Tannenbaum said. “It’s always been somewhere where a lot of trends have started – it’s just a place where ideas can get off the ground.”

Angela Hoover, the CEO and cofounder of Andi, an AI search-engine startup, moved the company to San Francisco earlier this year.

“Andi was initially based in Miami, which has a growing, vibrant startup scene. But increasingly, the heart of AI seemed to be beating in the Bay Area,” she told Insider.

The move has been enormously beneficial for the company, Hoover said, as it allowed Andi to accelerate its product development and has made hiring easier.

“It was a great decision,” Hoover said. “For an AI startup, there’s no better place to be right now than in San Francisco.”

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Business

By Eric Revell , Fox Business

Published
July 31, 2023

Updated
July 31, 2023, 1:23 a.m. ET

Billionaire Elon Musk says Twitter – the social media company he is in the midst of rebranding as “X” – will keep its headquarters in San Francisco despite the “doom loop” the city is facing as big-name businesses head for the exits.

Musk, who led a group of investors in acquiring Twitter that took the company private in a $44 billion deal last year, tweeted Saturday that the company’s headquarters will remain in San Francisco despite receiving offers aimed at enticing the company to relocate.

“Many have offered rich incentives for X (fka Twitter) to move its HQ out of San Francisco. Moreover, the city is in a doom spiral with one company after another left or leaving. Therefore, they expect X will move too. We will not,” Musk explained.

“You only know who your real friends are when the chips are down. San Francisco, beautiful San Francisco, though others forsake you, we will always be your friend,” Musk’s tweet concluded.

Elon Musk says the company’s HQ will remain in San Francisco despite the city facing a “doom spiral.” Getty Images

San Francisco’s economy has suffered from an exodus of businesses and residents in the last few years, creating a “doom loop” in which a local government enters a downward fiscal spiral as its tax base declines.

An urban doom loop involves a decline in workers present in offices in city centers, which results in businesses shrinking their office footprint and rental overhead.

The decline in demand causes real estate prices to fall, which in turn reduces property tax revenue while other sources of tax revenue, like sales tax, also take a hit due to the reduced traffic in downtown areas.

Workers install a large X on the roof of the former Twitter headquarters on July 28, 2023 in San Francisco, California. Getty Images

As the overall tax base declines, it becomes harder for city governments to fund public services like law enforcement as they’re forced to make trade-offs that include things like budget cuts or tax hikes to stabilize their finances – both of which can drive more businesses and residents to depart if those policies have a negative effect on the economic climate or overall quality of life.

The growing popularity of remote work has accelerated that trend, decreasing the number of workers heading to the office on a daily basis as it becomes easier than ever for workers to live in suburban and rural areas without commuting.

The tech-heavy economy of San Francisco and criticisms of the city government’s record on public safety issues have made it a case study in the dynamics that drive urban doom loops.

Twitter is transitioning from its bird logo to a new brand based on the letter X. Getty Images

According to data from the Census Bureau, the population of San Francisco County declined by 7.5% from April 1, 2020, to July 1, 2022.

Commercial real estate firm CBRE released data in early July that showed that San Francisco had an overall office vacancy rate of 31.6% in the second quarter of 2023.

The CBRE report noted that in the last quarter “negative net absorption accelerated due to slow leasing activity, combined with a high volume of lease expirations and several new sublease listings.

This resulted in 1.83 million sq. ft. of occupancy loss, which increased the market-wide vacancy rate from 29.4% to 31.6%.”

Although Twitter isn’t relocating its headquarters, the company has sought to shrink its office footprint in San Francisco and faced a lawsuit from its landlord earlier this year over unpaid rent – although the social media company has faced similar suits at offices in Denver, Oakland and London since Musk acquired Twitter and began a broad cost-cutting push to stabilize its finances.

Amid Twitter’s rebrand to X, city officials filed a complaint and opened an investigation into whether the company had the proper permits to install an illuminated “X” atop its downtown headquarters.

Police had stopped the installation last week but later said there was a “misunderstanding” and that the incident was not a police matter.

City officials say a permit is required to change letters or signs on buildings or to erect a new sign on top of a building.

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