SAN FRANCISCO, March 12, 2024 — Silicon Valley Bank (SVB), a division of First Citizens Bank and financial services provider to some of the world's most innovative companies and investors, today announced the opening of its new office in downtown San Francisco. Located at 222 2nd Street, the updated space features modern workspaces as well as an event room and outdoor terrace for meetings with clients and innovation economy partners.

“SVB has enjoyed being part of the innovation community for 40 years and we are excited to continue serving Bay Area founders and investors from our vibrant new location in the city,” said Marshall Hawks, SVB senior market manager in San Francisco. “Our customers value our ability to bring our ecosystem partners together, and our new office event space enables even more of that connection.”

This investment from SVB and parent company First Citizens in San Francisco supports the bank's growth objectives and continued commitment to serving the innovation economy. SVB has been actively serving the innovation economy since it was taken over by First Citizens in March 2023. With 40 years of experience, SVB has more experience serving innovation clients than any other financial services provider. The entire business is designed specifically for high-growth companies and investors and delivered at the speed they need. SVB remains committed to the success of the investors and innovators who are inventing the future and now has the full support of the 125-year-old First Citizens Bank to continue pursuing this mission.

SVB will occupy several floors of the building and will move from its office at 505 Howard Street just a block away. SVB has a flexible hybrid work policy, so the space is equipped with numerous collaboration areas as well as private video conferencing areas for hybrid working.

The new office also includes more than 6,000 square feet of entertainment space for events. SVB is known for hosting events that bring the innovation economy together. In the last three quarters of 2023, SVB held or sponsored more than 400 events nationwide. The SVB Experience Center at 532 Market Street will continue to be used for customer events.

SVB has had a presence in San Francisco for 25 years since opening its first office at 185 Berry Street in China Basin in 1999. In addition to the San Francisco office, SVB has Bay Area offices in Menlo Park, Palo Alto and Santa Clara.

About Silicon Valley Bank

Silicon Valley Bank (SVB), a division of First Citizens Bank, banks some of the world's most innovative companies and investors. SVB provides commercial and private banking to individuals and companies in the technology, life sciences and healthcare, private equity, venture capital and premium wine sectors. Operating in innovation centers across the United States, SVB serves the unique needs of its dynamic clients with deep industry knowledge, insights and connections. SVB's parent company, First Citizens BancShares, Inc. (NASDAQ: FNCCA), is one of the 20 largest U.S. financial institutions with more than $200 billion in assets. First Citizens Bank, member FDIC. Find out more at svb.com.

Media contact 

Katie Ellis Fredlund

kellis@svb.com

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The office has event rooms for customers from the innovation economy

SAN FRANCISCO, March 12, 2024 /PRNewswire/ — Silicon Valley Bank (SVB), a division of First Citizens Bank and a financial services provider to some of the world's most innovative companies and investors, today announced the opening of its new downtown office San Francisco. Located at 222 2nd Street, the updated space features modern workspaces as well as an event room and outdoor terrace for meetings with clients and innovation economy partners.

Silicon Valley Bank today announced the opening of its new office in downtown San Francisco. Located at 222 2nd Street, the updated space features modern workspaces as well as an event room and outdoor terrace for meetings with clients and innovation economy partners.

“SVB has enjoyed being part of the innovation community for 40 years and we are excited to continue serving Bay Area founders and investors from our vibrant new location in the city,” he said Marshall HawksSVB Senior Market Manager San Francisco. “Our customers value our ability to bring our ecosystem partners together, and our new office event space enables even more of that connection.”

The San Francisco The investment by SVB and parent company First Citizens supports the bank's growth objectives and its ongoing commitment to serving the innovation economy. SVB has been actively committed to the innovation economy since it was taken over by First Citizens in 2011 March 2023. With 40 years of experience, SVB has more experience serving innovation clients than any other financial services provider. The entire business is designed specifically for high-growth companies and investors and delivered at the speed they need. SVB remains committed to the success of the investors and innovators who are inventing the future and now has the full support of the 125-year-old First Citizens Bank to continue pursuing this mission.

SVB will occupy several floors of the building and will move from its office at 505 Howard Street just a block away. SVB has a flexible hybrid working policy, so the space is equipped with numerous collaboration areas as well as private video conferencing areas for hybrid working.

The new office also includes more than 6,000 square feet of entertainment space for events. SVB is known for hosting events that bring the innovation economy together. In the last three quarters of 2023, SVB held or sponsored more than 400 events nationwide. The SVB Experience Center at 532 Market Street will continue to be used for customer events.

SVB was represented in San Francisco for 25 years, since opening its first office at 185 Berry Street in China Basin in 1999. In addition to the San Francisco Office, SVB has offices in the Bay Area Menlo Park, Palo Alto and Santa Clara.

About Silicon Valley Bank
Silicon Valley Bank (SVB), a division of First Citizens Bank, banks some of the world's most innovative companies and investors. SVB provides commercial and private banking to individuals and companies in the technology, life sciences and healthcare, private equity, venture capital and premium wine sectors. SVB is continuously active in innovation centers The United StatesWe serve the unique needs of its dynamic customers with deep industry expertise, insights and connections. SVB's parent company, First Citizens BancShares, Inc. (NASDAQ: FCNCA), is among the 20 largest U.S. financial institutions with more than 200 billion dollars in assets. First Citizens Bank, Member FDIC. Find out more at svb.com.

SOURCE Silicon Valley Bank

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(Bloomberg) — San Francisco’s Westfield mall was for decades the city’s premier shopping destination, a nine-story complex in the heart of downtown known for its iconic glass dome and spiral escalators.

These days, the property is struggling with empty storefronts and falling foot traffic — so much so that owners Unibail-Rodamco-Westfield and Brookfield Corp. are giving the mall up to lenders, underscoring the wider challenges for brick-and mortar retail. Last weekend brought a particularly deep blow: the anchor Nordstrom Inc. store closed after 35 years.

Just an hour’s drive south, Westfield has another shopping center in San Jose that’s booming. Located in the heart of Silicon Valley, it’s added new stores, including a three-story Eataly eatery and a luxury wing with brands like Tiffany & Co. and Versace. The mall’s sales have increased by 66% since 2019.

The contrast highlights the changing fortunes of the world’s tech epicenter at a time of industry upheaval and a post-pandemic recovery that has seen dense US downtowns struggle. 

San Francisco, a major beneficiary of the last decade’s boom as young workers flocked to a lively urban center, is floundering due to an exodus of people and empty office buildings. The suburban region of Silicon Valley, meanwhile, has seen its economy hold up relatively well from remote work and the fortunes of the likes of Nvidia Corp. and Apple Inc.

“Silicon Valley is a net winner from the pandemic,” said Nick Bloom, an economist at Stanford University who coined the term “donut effect” to describe how urban centers are losing their appeal while suburbs are flourishing. 

Read More: Tech’s Bust Delivers Bruising Blow to Hollowed-Out San Francisco

San Francisco’s downtown is lagging behind every other major US city in its post-pandemic recovery. Its office vacancy rate has surged to 30% as tech companies opt for remote work, downsize or move away. The city shed 40,000 residents during the pandemic and its population is projected to remain 3% smaller by 2060.

Silicon Valley has seen an even slower return of workers to its offices, according to security company Kastle Systems. But the area’s sprawling landscape made up of tech campuses and shopping plazas makes it less dependent on people filling downtown office towers. Property values are rising, three of its companies — Apple, Alphabet Inc. and Nvidia — have more than $1 trillion in market value each, and its population is set to grow over the longer run.

While Silicon Valley’s unofficial capital of San Jose — the Bay Area’s biggest city, with roughly 1 million residents — has long been overshadowed by its flashier neighbor, Mayor Matt Mahan envisions that it that can benefit as San Francisco’s economy reels.

The Bay Area’s center of gravity is shifting to areas that are more “business friendly, larger, and have a greater talent pool,” Mahan said in an interview. “I predict one day it will be the San Jose-Bay Area.”

Cities across the Bay Area are struggling with high housing costs — with the median home price in the region topping $1 million — along with a homelessness crisis and the departure of residents to cheaper areas. In a sign of frustration over mounting challenges as well as the tech industry’s deep roots in the region, a group of prominent investors are backing the purchase of thousands of acres of farmland to build a new urban oasis about 50 miles (80 kilometers) northeast of San Francisco.

Read More: Secret California City by Ex-Goldman Trader Faces Scrutiny

San Francisco, though, faces it’s own unique set of challenges as perceptions of rising crime and street squalor contribute to people staying away. Mayor London Breed says she’s working hard to revitalize the downtown, and she wants to reform business taxes and attract new companies to vacant office buildings. She has even proposed the idea of razing San Francisco’s Westfield mall and building a soccer stadium in its place. 

“This is not the first time we’ve gone through a financial downturn,” Breed said in an interview last month at City Hall. “We’ve rebounded and diversified and we have sought different industries. And that’s why people keep betting on San Francisco.” 

The shift of people in Bay Area is having an influence on the real estate market, which remains the most expensive in the country. The median sale price of a home in the Silicon Valley town of Santa Clara was $1.5 million in July, up 8% from a year ago, according to Redfin. In San Francisco, the price has dropped by 8% to $1.3 million as the city saw more listings and less demand.

The region’s public services are also feeling the strain. While Silicon Valley’s bus and train operator expects a 10-year surplus thanks to higher sales-tax revenue from local and online shopping, transit agencies serving downtown San Francisco have scrambled for funding to avoid service cuts. 

The transit crisis is just a symptom of the city’s larger fiscal woes. Overall, San Francisco is facing a $780 million budget shortfall and Moody’s in July lowered its credit rating outlook to negative.

Silicon Valley, encompassing more than a dozen cities, is the cradle of some of the world’s tech behemoths. Companies including Apple and Intel Corp. were born there, often starting in garages before expanding into sprawling campuses. Alphabet resides in Mountain View and Meta Platforms Inc. calls Menlo Park home. Cupertino is known for Apple’s Infinite Loop campus.

“You couldn’t have a least glamorous place on Earth,” said Mark Ritchie, a commercial real estate broker with offices in both areas. “But it is so productive it’s unbelievable.” 

Santa Clara Mayor Lisa Gillmor acknowledges that her city of about 130,000 residents may not offer the fine dining and nightlife found in San Francisco. But with plans to host the 2026 Super Bowl and the FIFA World Cup soccer tournament, the city is working to enhance its appeal. “Let’s be frank, San Francisco has fun,” she said. “That’s what we’re missing here.”

Her city represents the area’s boom-and-bust tendencies — home to both Nvidia and Silicon Valley Bank, the tech-favored lender that collapsed this year.

The bank’s failure rippled throughout the region and shows that Silicon Valley faces many of the same challenges as San Francisco, including a wave of layoffs and a pullback in venture-capital funding. Notable companies including Oracle Corp. and Hewlett Packard Enterprise Co. have moved their headquarters to Texas, and Google has paused a planned San Jose mega-campus. 

Silicon Valley’s office-vacancy rate has surpassed 18% — almost tripling from 2019 — but it’s still far less than San Francisco’s. 

As the tech industry recovers from the slump of 2022, San Francisco is looking to bounce back. Last week, the city’s first Ikea store opened less than a block away from the Westfield mall. Office attendance in San Francisco increased 38% in July from a year earlier, the biggest gain of any US city, according Breed’s office. And tenant demand for space jumped 16% in the second quarter, according to real estate firm Jones Lang LaSalle, buoyed by the booming artificial-intelligence industry.

“We get back on our feet and keep moving forward,” Breed said. “AI is starting to take flight in a whole other way.” 

©2023 Bloomberg L.P.

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After months of high-level meetings and discussions, government officials and Big Tech leaders have agreed on one thing about artificial intelligence: The potentially world-changing technology needs some ground rules. But many in Silicon Valley are skeptical. WashingtonPost: A growing group of tech heavyweights — including influential venture capitalists, the CEOs of midsize software companies and proponents of open-source technology — are pushing back, claiming that laws for AI could snuff out competition in a vital new field. To these dissenters, the willingness of the biggest players in AI, such as Google, Microsoft and ChatGPT maker OpenAI to embrace regulation is simply a cynical ploy by those firms to lock in their advantages as the current leaders, essentially pulling up the ladder behind them. These tech leaders’ concerns ballooned last week, when President Biden signed an executive order laying out a plan to have the government develop testing and approval guidelines for AI models — the underlying algorithms that drive “generative” AI tools such as chatbots and image-makers.

“We are still in the very early days of generative AI, and it’s imperative that governments don’t preemptively anoint winners and shut down competition through the adoption of onerous regulations only the largest firms can satisfy,” said Garry Tan, the head of Y Combinator, a San Francisco-based start-up incubator that helped nurture companies including Airbnb and DoorDash when they were just starting. The current discussion hasn’t incorporated the voices of smaller companies enough, Tan said, which he believes is key to fostering competition and engineering the safest ways to harness AI. Companies like influential AI start-up Anthropic and OpenAI are closely tied to Big Tech, having taken huge amounts of investment from them.

“They do not speak for the vast majority of people who have contributed to this industry,” said Martin Casado, a general partner at venture capital firm Andreessen Horowitz, which made early investments in Facebook, Slack and Lyft. Most AI engineers and entrepreneurs have been watching the regulatory discussions from afar, focusing on their companies instead of trying to lobby politicians, he said. “Many people want to build, they’re innovators, they’re the silent majority,” Casado said. The executive order showed those people that regulation could come sooner than expected, he said. Casado’s venture capital firm sent a letter to Biden laying out its concerns. It was signed by prominent AI start-up leaders including Replit CEO Amjad Masad and Mistral’s Arthur Mensch, as well as more established tech leaders such as e-commerce company Shopify’s CEO Tobi Lutke, who had tweeted “AI regulation is a terrible idea” after the executive order was announced.

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Availability rate in Q3 spiked to 36% in San Francisco. Sublease space nearly doubled YoY in Silicon Valley. Leasing activity collapsed. More landlords default.

By Wolf Richter for WOLF STREET.

The office nightmare brought on by working from home and Corporate America’s sudden epiphany that they will never need all this office space, keeps on giving: Despite all the hype and hoopla about AI, the office space on the market and available for lease in San Francisco in Q3 jumped to a stunning 36.3% of the total office space, another all-time record, up from 35.1% in Q2, according to Savills.

Including 9.4 million square feet (msf) of sublease space, 31.5 msf of office space is now on the market. Sublease space is where tenants have decided they don’t need this space and attempt to find a tenant for the space until the lease terminates.

Asking rents have remained stubbornly enormous at $69.15 per square foot per year in Q3, despite the massive availability, though they have come down some from the highs in 2019 of over $80 per square foot per year. But asking rents are just that. Reality when leases are finally signed looks very different as landlords are desperate to make deals and are offering “record high concessions,” according to Savills (chart via Savills, gray columns, left scale = rents; orange line = Class A availability, yellow line = total availability, right scale):

And if landlords cannot bring in or keep tenants at rents that are high enough to meet the loan costs and operating costs, they default on the loan. Defaults on office buildings is now a constant drumbeat. In August, another three were reported whose mortgages were sent to special servicing, according to the SF Chronicle, citing DBRS Morningstar. Assignment to a special servicer indicates that a default is either imminent or has already occurred:

The landlord of 222 Kearny Street (148,000 sf), GEM Realty Capital in Chicago, missed a payment on the $24 million loan in August. The building is 27% vacant. Part of the remainder is leased to WeWork, which is teetering on the edge of a bankruptcy filing.

The landlord of 995 Market Street (91,000 sf), Bridgeton Holdings in New York, defaulted on a $45 million loan. The building is now 92% vacant. WeWork, which had leased 75% of the building, opted to terminate the lease early in August 2021 and was outa there. “The borrower has stated they will not be making any more payments,” the special servicer said in a note in August, cited by Morningstar, according to The Real Deal.

The $12.5-million mortgage on 1045 Bryant Street (35,000 sf) – a “high-end brick and timber building,” as the 1916 building, renovated in 2014, is now being pitched – was sent to a to a special servicer, indicating default or imminent default by the landlord, PBV VI. The building is vacant.

CMBS, of course. The mortgages tied to these three buildings, like most of the mortgage defaults on office properties that have come across our desk, are not held by banks, but had been securitized into Commercial Mortgage-Backed Securities (CMBS) and sold to investors. When these mortgages get into trouble, they’re sent to the special servicer that represents the CMBS holders.

Nationwide, defaults on office CMBS are now spiking at an astounding rate.

The market for sales of office building is beginning to unfreeze in San Francisco, but at discounts of 60% to 75% off from where they’d been valued a few years ago. We discussed the first two sales that took place in the new era here (75% off), and here (70% off), and there have been a few more sales since then in the 60% to 75% off range.

Office values massively repriced, office rents not yet. Part of the reason for rents remaining ridiculously high even for vacant space is that landlords must have a minimum amount of rent income or potential rent income to even have a chance to cover the interest expense and operating costs. They cannot cut their rents by a significant amount. Instead, they’ll default, take their loss on their equity, and let the lenders have the building and take the remaining losses.

The lender can then sell the building at a huge discount from its previous valuation, and at a huge loss on the loan, attract a new developer that, now with a lower cost basis, can fix up the building, and market the space at lower rents, which would push down overall rents and revitalize the totally overpriced market. Price can solve all kinds of problems.

That’s at least how it should happen – but that process is slow and hasn’t happened yet. And rents are still too damn high.

By sub-market, the availability rates ranged from 27.7% in the Union Square/Civic Center area to a catastrophic 57.9% in the Yerba Buena area, according to Savills. The Financial District North had an availability rate of 32.1%; the Financial District South 34.6%, both below the city average.

Leasing activity fell to just 0.8 msf in Q3, from 1.1 msf in Q2 and from the 2.5-msf range before the pandemic. Of the 10 largest leases signed:

• The top three were signed by, you guessed it, generative AI startups. But one of them, Hive AI, was just a relocation.
• Three were relocations: company vacates one office, moves to another office, not helping the overall office market; and if the move, as is now often the case, involves downsizing, it worsens the office market.
• One was a renewal.
• Six were new leases.

In Silicon Valley, the office availability rate remained that the record high seen since last year of 26.6%, with Class A availability rates over 30%, according to Savills.

Availability rates topped out at 35.9% in Downtown San Jose, 33.5% in Mountain View/Los Altos, 34.4% in Campbell/Los Gatos, and 29.7% in Santa Clara.

About 24 msf of office space was available for lease, including sublease space, which nearly doubled year-over-year to a record 7.6 msf.

Leasing activity plunged 60% year-over-year to just 652,000 sf, and was down from the 1.5 million to 2.8 million range in 2018 and 2019.

And yet despite the huge availability and the plunge in demand – oh, you knew this was coming – asking rents in Q3 rose 3.0% year-over-year to $5.22 per square foot per month ($62.64 psf per year), in part on a shift in mix, as “higher priced space is now available on the market both directly and for sublease,” according to Savills.

Of the top 10 leases signed:

• The top two were just renewals.
• One was a lease restructure.
• Seven were new locations

(Chart via Savills, gray columns, left scale = rents; orange line = Class A availability, yellow line = total availability, right scale):

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(Photo provided by Redaptive) Redaptive, which specializes in making commercial and industrial buildings more energy efficient, has relocated its headquarters from San Francisco to Denver. The company has had an office in the Denver area since 2019.

A company that specializes in making the facilities of some of the country’s largest companies more energy efficient has moved its headquarters to Denver.

Redaptive, which describes itself as an energy-as-a-service provider, was formerly based in San Francisco. The company opened an office in the Denver area in 2019 and made the Mile High City its official headquarters in March.

“Denver was, I would say, our HQ2 with San Francisco as our main location,” said Arvin Vohra, CEO of Redaptive.

Making Denver the official headquarters “was a natural fit for us internally,” Vohra said. The office is located at the Tabor Center on 17th Street in downtown Denver.

In recent years, companies from across the country and around the world have relocated their headquarters to Denver. For example, Bay Area company Virta Health moved to Denver last year, as did British company Macs Adventure.

The city’s commitment to sustainability was a big draw for Redaptive. Vohra noted that Denver has a climate protection plan as well as goals for the transition to renewable energy.

Vohra said other factors in the move include Denver’s central location, quality of life, talent pool and area universities. Redaptive hires new employees every week. Vohra expects the current Denver workforce to grow to approximately 100 over the next few months.

The company also has sales offices across the country.

According to Vohra, Redaptive has grown dramatically since opening an office in Denver. In 2019, the company said it managed approximately 1,300 locations with more than 100 million square feet of commercial and industrial facilities in 44 states.

According to the company, Redaptive currently manages 3,000 locations covering approximately 200 million square feet of commercial and industrial properties in 47 states. Of these locations, 46 projects are in Colorado.

“The investment we are looking to make in Denver is very significant,” Vohra said.

The Canada Pension Plan Investment Board announced in late December that it had invested approximately $200 million in Redaptive.

“The ambition of our investors and the purpose of raising this kind of money is to grow the business dramatically,” Vohra said.

It is more important than ever to make buildings more energy efficient and environmentally responsible, he added.

Buildings are the source of about 40% of the world’s heat-trapping emissions. Reducing these emissions is seen as essential to dealing with climate change. Denver and other Colorado municipalities and the state are updating their building codes to promote energy efficiency and encourage the use of electricity in buildings instead of fossil fuels.

Redaptive works with companies across the country that want to save money by reducing energy use and meeting their own greenhouse gas emission reduction goals. The company designs the project to achieve these goals, prepays for the equipment and construction, maintains the equipment, and measures and verifies the results.

Companies Redaptive has worked with include AT&T, Whirlpool, Goodyear, Cintas and Bank of America.

“Often these customers have hundreds, if not thousands, of facilities,” Vohra said.

To meet their carbon reduction goals, “they just need more people doing more things faster,” he said.

See more on Silicon Valley

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A new solid wood office building in Silicon Valley called Verdant Sanctuary was recently approved for construction. Located in Stanford Research Park in Palo Alto, California, it aims to embrace nature through every element of its design.

The two-story, 4,830 m² (52,000 sf) building was designed by Form4 Architecture – a San Francisco-based firm with experience designing for the Bay Area tech space – and is recognized as one of the first of its size in Silicon Valley for a sustainable mass- Timber construction must be designed and approved. It embraces nature through its surroundings, its almost all wood and glass construction and its dramatic roof design reflecting the shape of a bird’s wings.

“We call the building Verdant Sanctuary because it harmonises with the surrounding buildings and adds an inspiring, sustainable project to the community,” says Architect John Marx, AIA, Artistic Director of Form4 Architecture.

The new building continues a legacy of advances and will be adjacent to 607 Hansen Way, Stanford Research Park’s first building. Designed by German Expressionist architect Eric Mendelsohn in 1953, 607 Hansen Way was originally the home of radar and microwave innovators Varian Associates. Verdant Sanctuary was designed to create a quiet, synergistic harmony with the current community that is sensitive to the size, design and materials of neighboring structures.

Designed to be pedestrian friendly, the project features one level of underground parking and a mature street tree landscape. The building is fully electric, with photovoltaic (PV) panels for sustainable energy generation and a green roof for water conservation and natural insulation. A roof garden and patio will enhance the park-like setting, and the heavy incorporation of solid wood into the building will reduce carbon emissions during construction and safeguard against potential building fires, as solid wood is fire resistant.

The design recently received an honorable mention at the International Architecture Awards from the Chicago Athenaeum: Museum of Architecture and Design and the European Center for Architecture Art Design and Urban Studies.

In addition to Form4, the Verdant Sanctuary project team includes Guzzardo Partnership (landscape architect), Luminae Souter (lighting design), DCI Engineers (structural engineer) and ME Engineers (mechanical, electrical and plumbing). [MEP] Engineer). The project anticipates groundbreaking in 2024 once an anchor tenant has been identified.

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SAN FRANCISCO — Employees at start-up Flow Health didn’t receive their paychecks Friday morning.

When the deposits didn’t run out, the people in the human resources department were confused. But Alex Meshkin, Flow Health’s CEO, said he knew immediately what went wrong.

The company uses another startup called Rippling to run its payroll process. “I said, ‘I guarantee you, you’re with Silicon Valley Bank. We’re screwed,'” he said.

The Silicon Valley Bank, lender to some of the biggest names in tech, collapsed on March 10. Regulators acted quickly to avert a meltdown. (Video: Reuters)

Flow Health employees were just a fraction of the thousands of people likely affected by Friday’s stunning Silicon Valley bank collapse, which marked the second largest bank collapse in U.S. history and sent shockwaves through the tech and financial worlds.

While the government took over the bank, known for lending to start-ups but also providing private banking with mortgages and other services, deposits are only insured up to $250,000. The assets of the bank amounted to more than 200 billion dollars. About $42 billion was withdrawn from the bank on Thursday alone, according to the California Department of Financial Protection and Innovation.

Silicon Valley Bank ended with the second largest bankruptcy in US history

Start-up founders feared they would be forced to lay off employees if money held by the bank was frozen or lost. Big companies like connected TV provider Roku and video game maker Roblox have warned investors that they have deposited hundreds of millions in cash with Silicon Valley Bank that may be at risk. And venture investors canceled scheduled meetings with startups, unsure of the implications for the industry. Other startups publicly assured customers that they were not exposed.

According to its website, Silicon Valley Bank has had relationships with more than half of the venture capitalized companies in the United States.

If the bank isn’t bailed out quickly, the fallout could be dire for many startups and the broader tech scene, said Garry Tan, chief executive officer of Y Combinator, one of Silicon Valley’s top startup incubators.

“This is an extinction-level event for startups and will set back startups and innovation by 10 years or more,” Tan said.

To all Sentry users, rest assured that Sentry does not have any accounts with SVB. Also, up until now, none of our service providers have flagged any issues that would interfere with our services to you. Sending our best to all our customers and the wider tech community today

— Sentry (@getsentry) March 11, 2023

Silicon Valley Bank did not respond to a request for comment. The Federal Deposit Insurance Corporation, which acquired the bank on Friday, said Silicon Valley Bank had total assets of about $209 billion and total deposits of about $175.4 billion at the end of December, but it’s unclear how much the bank has on their balance sheet now.

Depositors could withdraw up to $250,000 Monday, the FDIC said. A hotline number has been provided for those who deposited more to call.

The collapse of Silicon Valley Bank adds to a challenging time for tech companies after months of stock prices falling and tens of thousands of layoffs. After years of rapid growth, things have slowed and become more unstable – an apparent disconnect from the broader US economy.

Lackluster earnings reports show Big Tech’s golden age is fading

The sudden collapse of one of the industry’s most important institutions is fueling fears that the sector’s economic health may be worse than anticipated, and has tech leaders grappling with the fallout of losing a key chunk of the financial assets the industry relies on.

“There are a number of companies that can’t do payroll because their money is locked up with SVB,” said Brad Hargreaves, co-founder of the Coding Boot Camp General Assembly and a member of several start-up boards. “I think there will be layoffs.”

Founded in 1983, Silicon Valley Bank has served the technology industry through the ups and downs of the past four decades. During the start-up boom that followed the 2008 financial crisis, the bank grew rapidly, using its reputation to cater to the needs of fast-growing, ambitious start-ups. Companies that raised money from venture capitalists deposited it with the bank. Venture capitalists themselves also banked with the company, borrowing money to fund investments in new start-ups. And technicians and executives used the bank for their personal wealth management and to finance mortgages.

“They see themselves as a collaborative lender to the entire ecosystem,” Hargreaves said. “The best analogy would be almost a credit union in a small town, except it’s much larger and imagines the small town is technology.”

The bank required some customers to work exclusively with it to access credit, further centralizing its role within the tech ecosystem. One founder, who spoke on condition of anonymity to maintain his relationship with the bank, said he previously split his money across several banks until a deal with Silicon Valley Bank forced his company to put all of its money there.

Fears that the bank’s collapse could spill over to other companies and the broader economy echoed on Wall Street and in Washington on Friday. Treasury Secretary Janet L. Yellen said she was monitoring the situation, and Cecilia Rouse, chair of the White House Economic Advisory Council, said the bank stress tests conducted after the 2008 crisis meant the financial system was primed to deal with “these species to withstand shocks.”

The collapse of the Silicon Valley bank raises fears of a broader financial contagion

Shares of other regional banks fell, including First Republic Bank, which also serves the Bay Area and caters to startups and wealthy tech workers.

A Bay Area start-up founder concerned about the impact of Silicon Valley Bank went to First Republic Bank on Friday to wire his money to Chase, a much larger firm, in a rush he feared to overcome deposits. The founder, who spoke on condition of anonymity so as not to jeopardize his relationship with the bank, attempted to visit a more obscure Oakland location but said there was still a line of customers outside the door requesting cables.

“I just raised a bunch of money and I can’t believe it could just fizzle out,” he said in a text message sent from a bank conference room awaiting the transfer to be processed. Some of his friends who are startup founders and bank accounts at Silicon Valley Bank “believe they lost everything but $250,000,” he wrote. His transfer eventually went through before the cutoff.

As Silicon Valley Bank served startups and wealthy individuals, the majority of its deposits were above the state-insured $250,000, raising the prospect that billions of dollars worth of funds may go unrecovered. In the past, the government has paid out sums in excess of $250,000, but it’s unclear if that will be the case here.

On Friday, Rep. Matt Gaetz (R-Fla.) said he opposed a “taxpayer bailout” by the bank.

The potential financial toll became clear on Friday as listed companies were forced to warn investors about the risk.

Roblox told investors that about $150 million of its $3 billion in cash has been deposited with Silicon Valley Bank. Roku said $487 million of its $1.9 billion in cash was held by the bank. Medical device maker iRhythm Technologies said in a filing that $54.5 million of its $213 million in cash and short-term investments was there.

The time of the “Moonshot” in Silicon Valley is over

Other companies said they were facing serious consequences without disclosing details. Pharmaceutical company Axsome Therapeutics said it had “substantial” cash deposits with Silicon Valley Bank and one other bank, but believed the second bank’s account and an existing loan would be sufficient to sustain funding operations. National toy chain Camp on Friday urged customers to shop from its online collection of stuffed animals, art supplies and toy cars at 40% off during a special “BANKRUN sale.”

A San Francisco-based entrepreneur said he withdrew $250,000 after investors urged him to withdraw at least some money on Thursday, but attempts to transfer the rest of the money failed. The company has now frozen $2 million in funds.

With about 90 percent of his company’s reserves frozen, he faces bankruptcy within weeks. But he knew other startups whose cash and lines of credit were now frozen and could fail much sooner.

“That’s my bigger fear right now,” said the start-up founder, who spoke on condition of anonymity about concerns about the company’s financial disclosures. “I really hope that investors can save us.”

“Everyone I know has their money with SVB,” he added.

Many startup CEOs don’t know how to pay their employees and run their businesses.

Parker Conrad, CEO of payroll company Rippling, tweeted Friday that the company was moving its settlement bank to JPMorgan Chase and would start receiving money to employees no later than Monday. He apologized to employees who were not paid on time.

“They rely on us and we haven’t delivered. While payroll is ongoing, I know delays of any length have real repercussions, especially for anyone living paycheck to paycheck,” he wrote.

Meshkin, the health tech startup’s CEO, said ahead of Rippling’s latest update that the company will have to find a way to manually pay its more than 1,000 employees in the United States if the funds don’t make it to workers early next week States and Canada, for which they currently have no infrastructure.

“We have a lot of disgruntled employees,” Meshkin said.

Shondra Washington, who works part-time as the chief financial officer at several companies, said one of her clients was working with Rippling and was waiting for payroll. Other customers used Silicon Valley Bank for their own funds and cannot access their accounts at all.

“We don’t even know where the money is. It’s somewhere in the ether,” she said. “We don’t really know where it is or when it’s coming.”

They try to transfer their money to other banks but cannot access it. Some of their customers have not been able to pay sellers. “We’re panicking,” she said.

Michael Coren, Aaron Gregg, Lisa Bonos, Naomi Nix, and Joseph Menn contributed to this report.

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In California overall, prices dropped year-over-year, as sales collapsed, supply more than doubled. No dear, this isn’t just a seasonal dip.

By Wolf Richter for WOLF STREET.

San Francisco and Silicon Valley are now in the solid leadership role of the housing bust playing out in California with sales collapsing and prices heading south from the peak in April at an astonishing pace.

Just about everything that could come together came together. After a two-year outflux of workers due to working from anywhere, there came the collapse of the startup and crypto scenes, starting in 2021 and continuing unabated, leading to the early entries into my pantheon of Imploded Stocks. In early 2022 came the spike in mortgage rates. In mid-2022 came the downturn in employment at Big Tech. By that time, the Fed had been hiking its policy rates relentlessly, and Quantitative Tightening had kicked off. This was punctuated over the past two months by the chaotic dismantling of the workforce at Twitter and its ecosystem.

Local budgets have fallen into deep deficits – although most are still flush with cash from the pandemic funds received from the federal government and the state.

Vacant office space that is on the market for lease and sublease continues to balloon, while landlords have started to file for huge reductions in assessment values ​​to lower their property taxes, which is going to cut revenues further.

This comes garnished by stories in the New York Times that Twitter stopped paying rent on its leased office spaces, and that it was instructed not to pay vendors. At least one of those unpaid vendors – a Silicon Valley company whose software Twitter had licensed – filed a lawsuit last week in the San Francisco Superior Court for nonpayment. It stated, “shortly after Musk’s purchase of Twitter closed, Twitter refused to pay the outstanding quarterly invoice, which was due on November 30, 2022, and Twitter disclaimed any obligation to pay any future invoices…”

These are all signs that the housing market is going to get a lot messier. Prices have plunged the most in San Francisco, followed by the Silicon Valley counties of San Mateo and Santa Clara.

In San Francisco.

The median price of single-family houses sold in November in San Francisco plunged by 11.4% from October to $1.50 million, and by 27% from the peak in April, according to the California Association of Realtors. A nasty-looking chart:

Condo prices plunged by 4.3% from the prior month to $1.15 million, and by 9.5% year-over-year. Since the peak in April, the median condo price is down by 15.5%. Condo sales in November have collapsed by 49%.

Seasonally, the lowest months are December and January. So that’s still to come.

But who is going to buy in the spring selling season? Prices normally rise as demand picks up in the spring; but who will be the exuberant tech workers that will want to overpay for a house by borrowing against the collapsed value of their stock options? Those lucky ones that still have jobs and stock options?

The housing markets in San Francisco and Silicon Valley are tied to the boom-and-bust cycles of the startup scene – now combined with the crypto scene and cryptos – and they’re tied to the stocks of startups and big tech and social media companies in the area, to the jobs that have to be done locally, and to the value of the stock options. All of them are puking.

Year-over-year, the median price of single-family houses in San Francisco plunged by 21%, the sixth month in a row of year-over-year declines. It was the biggest year-over-year plunge since the peak of Housing Bust 1:

Silicon Valley, San Mateo County.

The median price of single-family houses in San Mateo County, which forms the northern part of Silicon Valley, plunged by 6.2% from October to $1.78 million, and by 26% from the peak in April.

Year-over-year, the median house price plunged by 20%.

Silicon Valley, Santa Clara County.

Santa Clara County, which forms the southern part of Silicon Valley and includes the Bay Area’s largest city, San Jose, is lagging behind but is moving right along. The median price of single-family houses dropped by 1.5% in November from October to $1.60 million, and by 19% from the peak in April:

Year-over-year, the median house price dropped by 5.5%, the first significant year-over-year decline in this cycle. Prices had already undergone significant year-over-year declines in 2018 and 2019, and were on a downward path until the trillions in money-printing, the surge in the stock market, and the interest rate repression began to boost prices again.

Currently, Santa Clara County lags San Francisco and San Mateo by a few months, it seems.

In all of California.

Sales of single-family houses in California collapsed by 47.7% in November, compared to a year ago, the biggest decline since 1980, according to the California Association of Realtors. Condo sales collapsed by 46%.

Unsold inventory more than doubled year-over-year to a supply of 3.3 months, and days on the market also more than doubled – before sellers pulled the unsold homes off the market again.

For all of California, the median price of single-family houses plunged another 3.0% in November from October, which pushed the price down year-over-year (-0.6%). The median condo price fell 2.1% in November from October, which whittled down the year-over-year gain to just 2.7%.

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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.

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