• Commercial real estate landlords are abandoning once prestigious properties in San Francisco.
• A lack of hope among property owners is due to office vacancies, but crime also plays a role.
• Expect the downtown downturn to get worse before it gets better, Manus Clancy von Trepp said.

The crash of downtown San Francisco is progressing rapidly.

Landlords big and small are waving the white flag amid mounting pressures the city is facing, in part due to the downsizing of some of the largest employers and the inertia of remote work.

In May, foot traffic to San Francisco offices fell nearly 60% compared to 2019 — the largest shortfall among major urban centers in the US tracked by Placer.ai, and it shows. According to the San Francisco Chronicle, the city’s 18 million square feet of vacant office space is large enough to house 92,000 people.

Since April, the office tower at 350 California Street has sold for a worrying 75% less than its pre-pandemic estimate. The owner of the flagship Hilton San Francisco Union Square and nearby Parc 55 turned over the keys to his creditors instead of trying to pay off a $725 million loan. Days later, Unibail-Rodamco-Westfield and co-owner Brookfield returned San Francisco City Center to their lenders after the mall was down to just over half occupancy after retailers moved out.

The capitulation of some of the most sophisticated real estate players following tech job cuts and the increasing permanence of remote work is a dark omen for the city’s downtown. Property defaults have been expected for a long time, but not all of a sudden: Many investors thought they would happen when owners took out options to extend the terms of their loans, which could lengthen their losses.

Even more troubling, the loss of workers, the business travelers they are attracted to, and the stores they shop in is creating a vicious cycle that is unlikely to be broken anytime soon, said Manus Clancy, chief executive officer at Trepp, which tracks and manages the company commercial real estate debt.

“San Francisco is in a hole in the ground that’s getting bigger by the day,” Clancy, who lives in New York, told Insider. “Shop closures, crime and other quality of life issues are creating an epidemic of negative headlines that keep tourists and workers away. It will likely get worse before it gets better.”

A wave of downsizing by big tech companies like Snap, Meta, and Salesforce helped the city’s office vacancy rate jump to nearly 30% last quarter, up from less than 5% three years ago, according to CBRE. The workers who remain employed have resisted the long commutes that are common in the peninsular city, data from Placer.ai shows.

Last quarter, only 36% of workers commuting to San Francisco offices commuted more than 5 miles, with the lowest percentage of long-distance commuters making the return trip to cabins in Boston, Chicago, Houston, and New York. as the data show. But for workers who live closer to their San Francisco offices, the percentage who have to commute daily is relatively high.

The good thing about vacancies: Space for startups

Some of these workers are likely among the explosively growing generative AI startups in San Francisco, with about 22% of them concentrated in the region. The founders of Krea, which develops models for high-quality imaging and asset management services, packed their bags in Miami last year and headed to San Francisco’s Hayes Valley neighborhood, not far from Union Square, for a haven transformed for businesses like yours.

But because startups are inherently small, they can’t make up for the population drain. According to the Census Bureau, fleeing the city reduced the population by more than 65,000 people from April 2020 to July 2022.

As housing demand slumped, average house prices, which have been buoyed up during the pandemic, are down nearly 18% for the year through April, nearly three times the drop in Manhattan. As for rentals, landlord Equity Residential has “limited pricing power” in the downtown market and is making concessions to attract renters, the company’s chief operating officer said on a conference call in April.

Jeff Burg, a real estate investor who has been buying and renting small apartment buildings since 2002, said he has abandoned the city, citing onerous regulation.

“I sold all of my rentals in San Francisco over the past year and have finally moved out with my family,” Burg told Insider via LinkedIn. “After 23 years we move on with our lives. Whatever is going on in San Francisco, we have no interest in being a part of it any longer.”

The city is characterized by the fear of crime

Crime, or the fear of it, often creeps into conversations about San Francisco as well.

Thomas Baltimore, the CEO of Park Hotels & Resorts, which gave up Union Square hotels last week, said in a statement that “road conditions” were adding to record-high office vacancy rates, adding to the increased strain on properties. Some neighborhoods — including the Tenderloin District, which borders Union Square and Westfield Mall — had higher homicide rates this year, although San Francisco’s homicide rate is at the lower end of major cities citywide, according to ABC 7.

According to the San Francisco Travel Association, crime doesn’t seem to have held tourists back, with numbers up 29% last year to 21.9 million and expected to reach 23.9 million this year.

Still, there are signs of crime everywhere in San Francisco. Assaults and robberies have risen while rapes have fallen, ABC 7 recently noted. And social media posts, including one from Elon Musk denouncing “horrific” violent crimes following the stabbing death of tech executive Bob Lee in April, are adding to the fear.

A Whole Foods market in the Mid-Market District — also near Union Square — experienced a crime wave so widespread that managers simply closed the store in April after it opened last year had been opened. According to the New York Times, 568 911 calls were received from the store over a 13-month period, many related to violence and drug use.

A commercial real estate agent, who asked not to be named, told Insider that on a recent family trip to town, his tour guide said the tenderloin had become so poor that cops were being paid more to keep the beat. People affected by homelessness have long congregated in the Tenderloin neighborhood, while the number of homeless people across the Bay Area has risen 35% to 38,000 since 2019, McKinsey & Co. found.

Frank Scavone, a veteran commercial real estate debt investor who is now a managing partner of Third Point Real Estate Strategies, pondered why the workers weren’t coming back, but was more certain of the result — plummeting building values.

“I wonder what the reason for the openings in San Francisco is,” Scavone told Insider. “Is it because nobody feels safe in downtown San Francisco? Is it because the ground-level merchants and amenities associated with downtown have disappeared because of crime?”

He continued, “Is it because downtown San Francisco is a little harder to get to from the Marin County suburbs or the East Bay?”

“Taken together, these issues set the stage for workers to say, ‘We don’t want to be there because we don’t feel safe, it’s not a comfortable work environment anymore, or we feel like we’re entitled to another work week. ‘ design,” he said.

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The post San Francisco’s Ache Worsens As Staff, Guests, and Customers Depart appeared first on DAILY SAN FRANCISCO BAY NEWS.

SAN FRANCISCO – Politically liberal San Franciscans are used to living close together with open drug use, faecal streets and petty crime. But a surge in home break-ins and outrageous shoplifting leads some residents to believe that the city they fell in love with is on the decline.

Caitlin Foster is one of those San Francisco shopkeepers who repeatedly had to put used needles and other drug paraphernalia away from the bar she ran. And after too many encounters with armed people in the crisis, Seattle’s transplant affection for its adopted home has grown sour.

“It was a goal to live here, but now I’m here thinking, ‘Where should I go now?’ I’m over it, ”said Foster, who runs the Noir Lounge in the hip Hayes Valley neighborhood.

A series of headline-grabbing crime stories – crowds breaking windows and stealing luxury purses in downtown Union Square, and daytime shootings in touristy Haight-Ashbury – have only added to the general feeling of vulnerability. Residents wake up to the news of attacks on elderly Asian Americans, broken-in restaurants, and boarded-up shop fronts in the city’s once-vibrant downtown area.

The pandemic has emptied parts of San Francisco, highlighting some of its drawbacks, including a laissez-faire approach by officials to open the drug trade just steps from the Opera House and Symphony Hall. Parents were desperate as public schools remained closed for most of last year as nearby counties welcomed the children back into the classroom.

“There is a widespread feeling in San Francisco that things are going the wrong way,” said Patrick Wolff, 53, a retired professional chess player from the Boston area who has lived in the city since 2005.

The San Franciscans will vote in June on whether to remove District Attorney Chesa Boudin, a former public defender who was elected in 2019 and whose critics say he is too lenient about crime. Its supporters say there is no spike in crime and that corporate wage theft is a more pressing issue than cases like that of a San Francisco woman who was eventually arrested after stealing more than $ 40,000 in goods from a target in 120 visits had.

“Where is the progress? If you say you’re progressive, we’ll get the homeless off the street and get mental health care, ”said Brian Cassanego, a San Francisco native who owns the lounge where Foster works.

Cassanego moved to Wine Country five months ago after stepping out one day to find a man who “looked like a zombie” with his pants up to his knees and bleeding from a syringe in his hip. Nearby, a woman cried out in shock.

“I went upstairs and said to my wife, ‘We’re going now! This town is ready! ‘”He said.

While overall crime has been declining for years, reports of thefts – shoplifting from a person or business – have increased by almost 17% year-over-year to more than 28,000. They stay lower than the 40,000+ thefts reported in 2019. Inquiries about cleaning dirty streets and sidewalks are most calls to 311, the city service number.

San Francisco’s well-publicized problems have served as fodder for the conservative media. Former President Donald Trump recently stepped in again, releasing a statement saying the National Guard should be sent to San Francisco to prevent robberies.

Elected officials say they are grappling with deep societal problems that are common in every major US city.

A high percentage of an estimated 8,000 homeless people in San Francisco are struggling with chronic addiction or severe mental illness, usually both. Last year, 712 people died from drug overdoses, compared to 257 people who died from COVID-19.

LeAnn Corpus, an administrative assistant, said a homeless man used a bike and a sheets to pitch a makeshift tent in front of her house and relieved himself on the sidewalk. She called the police, who came two hours later and cleared him out, but a homeless man camped in the back yard of her aunt’s house for six months after trying to get the authorities to remove him.

“This town just doesn’t feel like it anymore,” said Corpus, a third-generation local.

In Hayes Valley, business owners who are tired of trash lying around and the city is doing nothing to address the problem have come together to lease closed trash cans from a private company, said Jennifer Laska, president of the neighborhood association.

After the lease expired, the association managed to get the city to buy and install new public garbage cans designed to keep rubbish in and thieves out. That was four months ago.

“We’re still struggling to actually buy the trash cans,” Laska said.

The post San Francisco residents upset as homelessness, petty crime worsens: ‘This metropolis is finished!’ appeared first on DAILY SAN FRANCISCO BAY NEWS.

SAN FRANCISCO (CBS SF) – As San Francisco tries to recover from the devastating effects of the COVID-19 pandemic, crime and homelessness are now top concerns of local residents, many considering moving, according to a new poll.

The poll was published by the SF Chamber of Commerce and is based on feedback from more than 500 San Francisco residents who are registered to vote.

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It turns out that more than 40 percent plan to move out of the city in the next few years.

Lindsay Stevens just moved out on the weekend.

“There’s nothing worse than seeing such a beautiful place in such a mess and I really thought I was going to be sad when the moving companies loaded the last container on Saturday and I’ve never been so relieved,” said Stevens.

After living in San Francisco for more than 12 years, Stevens recently sold her apartment and moved to the Palm Springs area.

“I honestly believe that we have seen a massive decline in the quality of life over the past three years and that has only been improved by COVID,” she said. “Homelessness is a serious problem, people don’t feel safe walking their dogs … the number of break-ins seems to be increasing all the time.”

Their feelings are reflected in the results of the chamber’s survey.

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80% of residents say that crime has worsened in recent years, 70% think that the quality of life has decreased and 88% say that homelessness has worsened.

76% also believe that increasing the number of police officers in high-crime neighborhoods should be a high priority.

“I think safety is a big concern. Even two years ago when I originally returned to the city, I never considered certain neighborhoods to be necessarily unsafe, ”said Minku Lee from San Francisco.

The 24-year-old resident himself became a victim last Friday. He said he was out with his friends at happy hour on 3rd Street near Oracle Park when he was racially and physically assaulted by a homeless person.

“He also said an insult, knocked me over forcibly, the slash tripped me, really scared of the incident,” said Lee.

An overwhelming 82% of respondents said they would like to see more social workers on the street to help people with mental illness and drug problems.

Almost 75% supported more makeshift housing for the homeless.

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Earlier this month, Mayor London Breed announced a $ 1 billion investment to fix the problem over the next 2 years. This also includes funding for housing and psychiatric services.

The post San Francisco Residents Think about Relocating As Crime Worsens, High quality Of Life In A Decline – CBS San Francisco appeared first on DAILY SAN FRANCISCO BAY NEWS.

SAN FRANCISCO (CBS SF) – As San Francisco tries to recover from the devastating effects of the COVID-19 pandemic, crime and homelessness are now top concerns of local residents, many considering moving, according to a new poll.

The poll was published by the SF Chamber of Commerce and is based on feedback from more than 500 San Francisco residents who are registered to vote.

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It turns out that more than 40 percent plan to move out of the city in the next few years.

Lindsay Stevens just moved out on the weekend.

“There’s nothing worse than seeing such a beautiful place in such a mess and I really thought I was going to be sad when the moving companies loaded the last container on Saturday and I’ve never been so relieved,” said Stevens.

After living in San Francisco for more than 12 years, Stevens recently sold her apartment and moved to the Palm Springs area.

“I honestly believe that we have seen a massive decline in the quality of life over the past three years and that has only been improved by COVID,” she said. “Homelessness is a serious problem, people don’t feel safe walking their dogs … the number of break-ins seems to be increasing all the time.”

Their feelings are reflected in the results of the chamber’s survey.

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80% of residents say that crime has worsened in recent years, 70% think that the quality of life has decreased and 88% say that homelessness has worsened.

76% also believe that increasing the number of police officers in high-crime neighborhoods should be a high priority.

“I think safety is a big concern. Even two years ago when I originally returned to the city, I never considered certain neighborhoods to be necessarily unsafe, ”said Minku Lee from San Francisco.

The 24-year-old resident himself became a victim last Friday. He said he was out with his friends at happy hour on 3rd Street near Oracle Park when he was racially and physically assaulted by a homeless person.

“He also said an insult, knocked me over forcibly, the slash tripped me, really scared of the incident,” said Lee.

An overwhelming 82% of respondents said they would like to see more social workers on the street to help people with mental illness and drug problems.

Almost 75% supported more makeshift housing for the homeless.

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Earlier this month, Mayor London Breed announced a $ 1 billion investment to fix the problem over the next 2 years. This also includes funding for housing and psychiatric services.

The post San Francisco Residents Contemplate Relocating As Crime Worsens, High quality Of Life In A Decline – CBS San Francisco appeared first on DAILY SAN FRANCISCO BAY NEWS.