tech san still francisco office sammons

techsuch May 9, 2021 0 Comments

San Francisco office market in collapse as tech workers stay homeThe pandemic has brought the commercial real estate market in San Francisco toa new low, with work-from-home policies and office closures slowing SiliconValley-driven business expansion to numbers not seen in at least threedecades.New office-leasing activity in 2020 dropped a staggering 71% compared with theyear before, according to the real estate brokerage Cushman & Wakefield, from7.7m to 2.2m sq ft – the lowest since the early 1990s. Tenant demand alsohalved during the pandemic, from 6.6m sq ft to 3.3m sq ft.“Vacancies have obviously climbed substantially,” said Robert Sammons, Cushman& Wakefield’s senior director of Bay Area research, adding that more than halfof the rise was driven by sublease vacancy, a common commercial space practicein San Francisco in which subleasers lease from a tenant, not a propertymanager. “That has never happened before in San Francisco,” he said.The numbers emerge as the tech companies that fueled the office real-estateboom in the city – a boom that has contributed to the state’s affordablehousing and construction crisis – re-evaluate the future of office culture andworking from home.Google will keep its employees home at least until July, while Pinterest paidnearly $90m to break a lease on an unbuilt, 500,000-sq ft office it no longerneeds. Facebook has stated that it expects at least half of its employees willwork remotely for the next five to 10 years, while Twitter announced it wouldlet employees who wish to do so work from home “for ever”.In September, Twitter listed nearly 105,000 sq ft of its Mid-Marketneighborhood headquarters for sublease.What this all means for San Francisco and its future as a capital for the techindustry is still unclear. A survey of thousands of tech workers in May foundthat two out of three employees would consider moving out of the Bay Area ifgiven the opportunity to work remotely indefinitely. But Sammons said it wastoo soon to say if the pandemic had made any lasting changes to the techindustry or the fabric of office life in San Francisco.Rental prices are down for office spaces and residences, which could drawpeople back to the city, Robert Sammons says. Photograph: Jeff Chiu/APWhen coronavirus vaccines began to be distributed, Sammons found that tenantdemand in San Francisco had risen again to 4m sq ft. “We’re beginning to see achange, a mental change, if you will,” he said. “Now that vaccines are beingrolled out, people can see the end. They realize they may want to reoccupytheir spaces and continue to grow. They have more hope that this will bebehind us toward the end of this year.”Further sweetening the pot is that rental prices are now down for both officespaces and residences. Sammons believes that will draw people back to SanFrancisco and back to their offices.“It’s about work culture,” Sammons said. “It’s about working around people whodo the same thing you do. Will that pull exist when this is all behind us andthe offices are back open, to be in that competitive mode again and to createthat environment where they have to work with others? It’s a tricky questionto answer. But I still think there’s still that desire and still thatcompetition.”The city has had a complicated relationship with Silicon Valley, with theabundant wealth coming in from tech deepening stark racial and societalinequities that existed well before the second dotcom boom. But the departureof this much wealth – during a time when San Francisco is projecting a $653.2mbudget deficit – could be catastrophic as well.Sammons doesn’t see it happening anytime soon. Venture capital funding hitrecord highs in the Bay Area this year, he pointed out. “There’s still a hugecontingent of tech workers in the Bay Area,” he said. “The major tech playersare and still will be headquartered here. That feeling that there are still somany tech players here, big or small, that if you don’t like it at Company A,you can move to Company B, or you can start your own company – that feeling isstill there, that your opportunities are greater here in San Francisco than inother markets.“It’s going to take a while to come out of this for San Francisco,” Sammonssaid. “But we’re still a tech market. We will remain one of the tech capitalsof the world. There’s still a lot of churn as far as money goes in thismarket, and that will continue to be the case.”

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