How San Francisco Can Solve Its Empty Office Problem

Summary

San Francisco is facing an office vacancy crisis, with over 27 million square feet of empty office space downtown. This issue, spurred by the pandemic, has resulted in a $700 million budget deficit, impacting the local economy. A proposed solution is converting vacant offices into residential spaces to address both the office surplus and the housing crisis. While challenging due to high construction costs and regulatory barriers, similar conversions have been successful in other cities. Mayor London Breed emphasizes the need for bold action to solve both problems and revitalize downtown San Francisco.

Takeaways

• 🏢 San Francisco is facing a significant issue with 27.1 million square feet of vacant office space, equivalent to nearly 20 Salesforce Towers.
• 📉 The city's downtown, once vibrant, now suffers from high vacancy rates, with the economy impacted by over $700 million in budget deficits.
• 🔄 The pandemic has drastically changed the office landscape, with a shift towards remote work leading to a surplus of office space that will take years to resolve.
• 🏠 San Francisco's vacancy rate has risen to 25% from a pre-pandemic rate of about 4%, indicating a major shift in the real estate market.
• 💼 The city's historical reliance on commuters has diminished, with 46% of workers working from home in 2021, up from just 7% in 2019.
• 🏗️ To address the housing crisis, San Francisco has adopted the Housing Element, aiming to build 82,000 units by 2031, starting with over 10,000 units per year from 2023.
• 🏙️ Office-to-residential conversion is proposed as a potential solution to both the office vacancy and housing crises, with other U.S. cities successfully implementing similar strategies.
• 💼 The conversion process is complex and costly, with developers often lacking incentives to convert due to high construction costs and strict regulatory policies.
• 🏘️ Calgary, Canada, serves as a model for office conversion, with a streamlined process and government focus on housing, potentially offering insights for San Francisco.
• 🌟 Despite the challenges, there is optimism for San Francisco's recovery, with the potential for innovative solutions like office conversions to play a key role in the city's resurgence.

Q & A

What is the current issue with office spaces in San Francisco?

San Francisco is facing an empty office problem with 27.1 million square feet of vacant office space in the city, which is significantly impacting the economy and local businesses.

How does the vacant office space compare to the size of Salesforce Tower?

There is nearly 20 Salesforce towers worth of vacant office space in San Francisco, highlighting the scale of the issue.

What was the office vacancy rate in San Francisco before the pandemic?

Before the pandemic, San Francisco's office vacancy rate was about 4%, indicating a very low vacancy rate and a healthy commercial real estate market.

What is the current office vacancy rate in San Francisco?

The current office vacancy rate in San Francisco is around 25%, a significant increase from the pre-pandemic rate.

How has the pandemic affected San Francisco's economy in relation to office spaces?

The pandemic has led to a significant rise in vacant office spaces, resulting in an over $700 million budget deficit for the city, primarily due to the challenges around empty office spaces and businesses closing in the financial district.

What is the current state of the work-from-home trend in San Francisco?

San Francisco is referred to as the work-from-home capital of America, with 46% of workers working from home in 2021, up from 7% in 2019, contributing to the rise in office vacancies.

What is San Francisco's strategy to address the housing crisis in relation to the empty office spaces?

San Francisco is considering converting empty office buildings into residential units to address both the housing crisis and the surplus of office spaces.

What is the Housing Element and how does it relate to San Francisco's housing goals?

The Housing Element is a city initiative that requires 82,000 units of housing to be built by 2031, aiming to address the housing crisis by increasing the housing stock.

How does the conversion of office spaces to residential units compare in cost to new construction?

Office-to-residential conversions are generally about 30% less expensive than building from the ground up, making it a more cost-effective solution.

What are some of the barriers to converting office spaces into residential units in San Francisco?

Barriers include high construction costs, strict regulatory policies, and various fees that make the conversion process less financially viable for developers.

What steps is San Francisco taking to encourage the conversion of office spaces to residential units?

San Francisco is engaging with the business community to raise awareness of the possibilities and is considering policy changes, such as lowering affordable housing requirements, to make conversions more attractive.