I don't see how SF doesn't end up in a doom loop. The only positive news of late seems to be around AI companies taking up space, but that's just not that many employees. Office to residential conversions are good in theory but difficult to execute and certainly not something that SF will make easy, because SF doesn't make anything related to housing easy.
There won't be a "doom loop", just a market correction to relatively normal levels. Free market at work - everyone speculating on real estate professionally knows the risk (or should have known after the 2008ff subprime crisis). Bailing out morons should not be a thing - if no one suffers this time, it's just an invitation for an even worse bubble. The problem is that instead of eating their loss like they fucking should, it seems like the uber rich are funding endless "return to office" campaigns in media, and once again try to let the 99% suffer from worse employment conditions and onerous commutes to the office instead.
The only people I actually feel sorry for are regular homeowners who bought way overpriced properties because they had no alternative.
> The only people I actually feel sorry for are regular homeowners who bought way overpriced properties because they had no alternative.
Many markets in other states are still going up. The condos in my building are selling for $100 - $150k more than they did in 2022. Lower inventory and volume, but the demand is red hot.
> There won't be a "doom loop", just a market correction to relatively normal levels. Free market at work - everyone speculating on real estate professionally knows the risk (or should have known after the 2008ff subprime crisis). Bailing out morons should not be a thing - if no one suffers this time, it's just an invitation for an even worse bubble.
The difference is the doom loop leads to things going below "normal" levels (and "normal" is not really a useful term here). Also, I don't think it's fair to say elevated office building prices in SF were the result of wild speculation - it was one of the most booming employment markets in the US with an incredible dearth of supply. High prices are just economic principles at work. Then something totally unexpected came and upended how we work, and that changed the market entirely - it was an external force, not people paying prices that weren't supported by the rents.
> Then something totally unexpected came and upended how we work, and that changed the market entirely - it was an external force, not people paying prices that weren't supported by the rents.
The thing is, if one is investing money, one should also take into account risk. Remote work has been a thing for years now, with ever faster adoption of broadband Internet. But it seems like a lot of people have either put way too much money into one single asset class or preferred to distribute money to shareholders instead of building some buffer for when tides start to turn. Either of these mistakes is completely avoidable and part of virtually any economics class, it's not rocket science - it's just plain old greed all around.
> The thing is, if one is investing money, one should also take into account risk.
This is true, but I think the idea that people should have priced in a black swan like a pandemic (and not only a pandemic, but a pandemic that changes the way we work) is not a reasonable one.
> Remote work has been a thing for years now, with ever faster adoption of broadband Internet.
This makes exactly the opposite point that you intend - despite the fact that people, especially those in tech, have had the infrastructure to work remotely for many years, SF's market still continued to go up in value and have incredibly high occupancy rates. If the condition existed for remote work for years and yet it had no appreciable impact on the use of office space, it wouldn't make any sense to assume that there will be a sudden change to cause everyone to work remotely and the market for office space to crash.
> This is true, but I think the idea that people should have priced in a black swan like a pandemic (and not only a pandemic, but a pandemic that changes the way we work) is not a reasonable one.
The world has become ever more chaotic the last years. Natural disasters, general political instability, even geopolitical instability has been on the table for a long LONG time now. Acting like a "black swan" event is unthinkable has been beyond foolish.
The worry about the doom loop is not that rich people lose money but that the current budget is tied to high tax receipts and when assessments go down tax revenue will plunge. Services will have to be cut to balance the budget.
> Services will have to be cut to balance the budget.
No. The US could also go and fix their tax code for once - start taxing the uber rich. Warren f..ing Buffet complained years ago he has to pay less tax than his secretary. A lot of the issues that cripple many Western countries relate to stupid tax breaks for the rich and mega corporations who have bought out politics.
Which is true but extremely problematic in itself. The poor and destitute should not depend on the graces of billionaires (or, worse, churches) for their basic needs, society should take care of them.
> The US could also go and fix their tax code for once - start taxing the uber rich.
We're talking about a municipality, not the US. Plus your whole point is fine in theory, but it's not going to happen any time in the near future. The question of whether SF is going to get stuck in a doom loop is a real one, and it should be examined through a lens of the social and political environment we're in, not a theoretical and unrealistic one.
If you want a Sweden-style social democracy, you need to significantly raise taxes on at least the upper quintile (in the US, that's just over $130k - coincidentally, that's around the cutoff for income subject to Social Security tax). But >$130k/year income is most common among the professional-managerial class, which has become a core Democrat constituency, so Democrats will for sure not raise taxes on them - Democrats have already promised not to raise taxes on households making less than $400k. So the US tax code isn't getting fixed anytime soon, unfortunately.
Yes, like Rainier says, a VAT would be very helpful to have as well. The US can probably get away with a little less taxation in theory due to having so many PMC high-income earners, but that would depend on the US knowing how to run government services efficiently...
My larger point is that Americans are largely under the delusion that heavily taxing the 1% would be enough, which is just not the case.
> My larger point is that Americans are largely under the delusion that heavily taxing the 1% would be enough, which is just not the case.
728 people in the US own more assets than half the US population together [1].
Let that fact sink in, and then ask yourself why the fuck no one in the US has taken to the pitchforks yet. At least here in Europe, the lower classes are on serious strike runs the last months - the UK, France and Germany are just examples.
You know what, you could leave each of these 728 uber rich people a billion dollar each. Enough money that neither they nor their children and their children have to work a day in their lifes ever. Basically, aristocracy, "landed gentry" or however you want to call it, just legally recognized. The rest of the wealth gets distributed among the population. Easy, isn't it?
I'm not defending the massive inequity which clearly exists, but wealth tax that targets a theoretical (eg) land value will lead to silliness as this 0.00017% aggressively devalue their holdings to avoid this tax.
That might be necessary in the steady state but Sweden never redistributed as much wealth to the top 0.1% as the U.S. has in the last 40 odd years.
In theory the US could go very far taxing a much smaller base because it has allowed so much money to be redistributed to this tiny base.
But even ignoring that your comment is unnecessary. Even if a Sweden like social democracy is the goal (which it doesn’t need to be…there’s many stopping points in between), the US doesn’t need to do it overnight. Raising taxes on the richest and then increasing the tax rates on lower brackets gradually over the decades as needed is an absolutely fine way to head in that direction as well.
perhaps that is true in the abstract - but the budget for the City of San Franisco is +$1Billion US dollars Per Year. Add to that, they routinely cheat small business and tourists on money (traffic tickets, multi-year payment terms for services rendered). Thirdly, the largest population group of the City is ethnic Chinese, some of whom are quite good with money.
The apartment I used to rent for $3,600 is now renting for $3,300 on Craigslist. I don't think the massive collapse of office building rents will be reflected in residential real estate. People still want to live in SF, it's companies that have realized that an office is a waste of money. Or maybe just rent an office with a few conference rooms to host meetings with business partners, let the bulk of your workforce WFH.
for years there have been fewer and fewer of those "regular homeowners" and increase in offshore money speculation, purchase-to-AirBNB, and other non-obvious transactions. A recent examination of US Tax filings (posted on YNews IIR) show that +1 million adults in the USA have the financial ability to purchase a home, and have not done so.
> A recent examination of US Tax filings (posted on YNews IIR) show that +1 million adults in the USA have the financial ability to purchase a home, and have not done so.
That doesn't seem like a good measure. There are a lot of people with means who would rather rent a space downtown that own a SFH in the suburbs. Those people would/should not be considered "regular homeowners".
if remote work stays SF will be in a similar situation to Detroit, although they will be somewhat better off just due to the climate and location of SF making it a desirable place to live. But SF will still lose a ton of tax revenue if fewer tech workers are living in the area
> The Office of Economic and Workforce Development (OEWD) and the San Francisco Planning Department have partnered together to announce a Request For Interest (RFI) from City stakeholders to provide information on existing and future downtown development projects as a critical component of the City’s economic recovery efforts.
I won't hold my breath until there's some actual action - I don't count taking requests for information from people as action. I definitely hope they move quickly (and FWIW I like Breed and I think she's done as good of a job as anybody could expect in what is an impossibly hard job), but years of living in SF have taught me that pessimism about the city getting things done is the right frame of mind.
Park 55 and the Hilton, owned by Park Resorts which owns a bunch of hotels in SF, are shutting down on a quick sale.
The CEO was in SF and said that SF properties have lost as much as 52% of business, where NYC (where they own a bunch of properties as well) will lose ~2-4% of bookings business...
He stated that after evaling SF - he said it will be back to normal after FIVE TO SEVEN YEARS. Maybe longer.
So, SF - is going to be a billionaire realestate cluster as hedgies swoop in for depressed prices.
No, I am talking about the near-term viability of the San Francisco tech/commercial/residential space - where hotels with ~1,000 rooms are being fire-sold because the hedgies are losing ~52% of their bookings [0]
So, the overall "slurped up" (as opposed to 'trickle-down') economy is really weak currently, and they are not seeing a positive return for a while, thus - Market street is going to suffer.
Let make Zuck and Ellison and Benioff (the largest land owners in Hawaii) convert/rebuild Lahaina - but provide some housing in SF for refugees... :-)
Amusing thing I remember in the aftermath of the Savings and Loan crisis. They over built commercial real estate in the South Bay. And after prices per sqft dropped dramatically. You could rent small office space for 60 cents/sqft.
Good time to be a small business. Bad time to be a landlord. Landlords don't create value, small/medial/large businesses create value. And excess rents are a real impediment to actual productive businesses.
So rents in SF/Bay Area dropping would be very beneficial to San Francisco.
Please explain your logic because it doesn't seem to match reality.
From what I see, there can be 3 types of landlords: those who built a house from scratch (obvious value creation), those purchased the house from someone else (value transfer; but that needs the buyer to hold alternate value in the first place) or inheritance (yeah, one just got lucky with right parents).
Only the 3rd category seem to match your statement and I agree that inheritance should be heavily taxed. But the first 2 categories? Landlords have literally created value or exchanged their created value for a house.
SF residential rents have stayed relatively flat vs NYC and it’s frankly a place many people prefer to live in over other major corporate nexuses like Chicago and Seattle. Eventually the pendulum will swing the other direction and SF will be the hip and hot place to be vs NYC. Of course both have been popular for early career/recent college grads for a long time, but anecdotally NYC has “just” began to attract more 20s people away from the Bay Area since 2020, and it’s getting expensive.
Once the cost of living difference between SF and NYC becomes large and well known enough, companies will start hiring more, or choose to start, in SF vs the current trend of picking NYC because talent will begin to prefer it.
That’s a huge risk for SF to take, and it also assumes someone who doesn’t want to live in NYC because of the rents will choose SF instead and not a 3rd city.
I think the type of young professional that lives in NYC mostly would prefer SF over a 3rd place, ignoring costs, or at least enough of them would that SF would get a leg up in attracting talent.
I have stayed in SF for almost a decade and have no plans to leave.
Many of my younger friends have moved to NYC (or elsewhere) and they have told me they don't like the overwhelming tech culture that permeate the bay drowning out the rest of the culture. I could see that happening to Seattle as well, but probably not NYC.
I can kind of understand it being like competing colonies of bacteria (each sub-culture). I think its pretty valid, but I don't mind all tech all the time ;D.
I also don’t mind tech all the time, and I also see it as competition among cities for young talent.
I guess my line of thinking is that young professionals will eventually find SF trendy again once NYC becomes passé for being too expensive, overhyped, attracting too many of the charlatans and clout chasers. People love different parts of the country for many reasons but I think in aggregate SF is generally a number 2 choice after NYC for many young professionals if cost is not a (big) factor. Which is why I think if the trend continues and NYC gets more and more expensive vs SF, 23 year olds will start picking SF over NYC
I've built out literally millions of square feet of commercial and healthcare sqft. (SFGH, El Camino, UCSF, Salesforce, Namco, Lucas, Gene, FB, Goog) (those are on my personal CV -- but the design firms I worked for built out pretty much every single tech site in SF, and the other cities for thes companies (LA, NYC,SF, CHI, and international sites)
I have ALWAYS been dumbfounded by how much per sf $
This scenario should be the posterchild for real-estate greed - NONE of these properties should cost this much - even if your lobby desks are built from 85,000$ Koa Wood Desks from hawaii that is illegal to harvest - and you have one of these in most of your reception lobbies on your MANY MANY floors (Salesforce)...
but here is the thing - all the businesses that died on Market and FiDi in SF - where high-end condos are all around, and other apartment buildings - there will be no walkability score for many of the apartments in those areas, and thus their prices should come down.
However, you'll notice that the building dropped 66% -- but any commercial (or residential) rental rates will certainly not decrease by that much (hedgies want to dump buildings (hence Park 55 and Hilton... with more to come)
-
Walkability is based on the ability to walk from residence to commercial, retail, grocery, entertainment, work, etc...
So if the first two levels of entire blocks of san francisco's market steet are all shuttered, non-interesting/iconic - why would you want to live anywhere near such an area.
Look at how lame the TwiXXXter building is now - all the shops that would have supported the employees are shuttered.
crappy vid, but informative of the number of shuttered places along market that just shows how depressing it is
> but here is the thing - all the businesses that died on Market and FiDi in SF - where high-end condos are all around, and other apartment buildings - there will be no walkability score for many of the apartments in those areas, and thus their prices should come down.
Why wouldn't they have (very high) walkability scores? Or do you mean that as commercial buildings they don't have walkability scores until some time passes, and prices will be lower than possible until the locations are scored?
I wanted to talk more about the sqft consumed by one of the Koa Wood reception desks I mentioned (These are desks made from Koa Wood - which is the treasure-wood of Hawaii, and you cannot harvest it - so you have to purchase an already-made-thing, then work it to your desired product.
This wood is super expensive (its going to sky-rocket due to the Maui fires (im sure some of those ancient stores had Koa things in them)
But to give you an idea:
The basic slabs that we installed in the lobbies of, say, 50 Fremont for salesforce - the thing was IIRC $~65,000k for a reception console top (with side curtains, live edge) - we roughly 24"x96" (I dont recall dimensions) --
EDIT - Apparently I am wrong on the purchasing of Koa, as you can get pieces - what I do know is that some of the receptions were made from older peices that were purchased and then rebuilt to the new format...
I do know they were >$65,000 - and I am trying to merge to follwoing sqft price for the area of both the desk and the sqft under it based on the $711 sqft price in SF + the cost of the Koa desk / its footprint...
So,
Assume
18x120 koa desk (made by a koa master in HI) $65000
Cost of raw materials (unknown)
sfqt cost in SF based on $(n) we will pick the $711 number and the other one.
Works out to ~20 SF at a price for just the actual flooring, at 14,220 per year. Then the cost of the wood can be calculated but doesnt matter at this point, that desk costs $~8.00 hr just to sit there (if it were available M-F, 8-5)
I wonder if the prior owners can retroactively challenge the property tax assessment prior to sale as too high. Even if not, seems like a big hit to city & county revenue.
61 comments
[ 3.3 ms ] story [ 119 ms ] threadThe only people I actually feel sorry for are regular homeowners who bought way overpriced properties because they had no alternative.
Many markets in other states are still going up. The condos in my building are selling for $100 - $150k more than they did in 2022. Lower inventory and volume, but the demand is red hot.
The difference is the doom loop leads to things going below "normal" levels (and "normal" is not really a useful term here). Also, I don't think it's fair to say elevated office building prices in SF were the result of wild speculation - it was one of the most booming employment markets in the US with an incredible dearth of supply. High prices are just economic principles at work. Then something totally unexpected came and upended how we work, and that changed the market entirely - it was an external force, not people paying prices that weren't supported by the rents.
The thing is, if one is investing money, one should also take into account risk. Remote work has been a thing for years now, with ever faster adoption of broadband Internet. But it seems like a lot of people have either put way too much money into one single asset class or preferred to distribute money to shareholders instead of building some buffer for when tides start to turn. Either of these mistakes is completely avoidable and part of virtually any economics class, it's not rocket science - it's just plain old greed all around.
This is true, but I think the idea that people should have priced in a black swan like a pandemic (and not only a pandemic, but a pandemic that changes the way we work) is not a reasonable one.
> Remote work has been a thing for years now, with ever faster adoption of broadband Internet.
This makes exactly the opposite point that you intend - despite the fact that people, especially those in tech, have had the infrastructure to work remotely for many years, SF's market still continued to go up in value and have incredibly high occupancy rates. If the condition existed for remote work for years and yet it had no appreciable impact on the use of office space, it wouldn't make any sense to assume that there will be a sudden change to cause everyone to work remotely and the market for office space to crash.
The world has become ever more chaotic the last years. Natural disasters, general political instability, even geopolitical instability has been on the table for a long LONG time now. Acting like a "black swan" event is unthinkable has been beyond foolish.
No alternative?
Highly doubtful.
More like they were just the "greater fool".
I can feel sorry for them in that because someday I may be in their shoes.
But they did have alternatives.
No. The US could also go and fix their tax code for once - start taxing the uber rich. Warren f..ing Buffet complained years ago he has to pay less tax than his secretary. A lot of the issues that cripple many Western countries relate to stupid tax breaks for the rich and mega corporations who have bought out politics.
SF is the most liberal city in the most liberal state. They don't have any issues taxing rich people (or any other person, that's for sure).
We're talking about a municipality, not the US. Plus your whole point is fine in theory, but it's not going to happen any time in the near future. The question of whether SF is going to get stuck in a doom loop is a real one, and it should be examined through a lens of the social and political environment we're in, not a theoretical and unrealistic one.
My larger point is that Americans are largely under the delusion that heavily taxing the 1% would be enough, which is just not the case.
728 people in the US own more assets than half the US population together [1].
Let that fact sink in, and then ask yourself why the fuck no one in the US has taken to the pitchforks yet. At least here in Europe, the lower classes are on serious strike runs the last months - the UK, France and Germany are just examples.
You know what, you could leave each of these 728 uber rich people a billion dollar each. Enough money that neither they nor their children and their children have to work a day in their lifes ever. Basically, aristocracy, "landed gentry" or however you want to call it, just legally recognized. The rest of the wealth gets distributed among the population. Easy, isn't it?
[1] https://www.snopes.com/news/2023/04/13/728-billionaires-hold...
I'm not defending the massive inequity which clearly exists, but wealth tax that targets a theoretical (eg) land value will lead to silliness as this 0.00017% aggressively devalue their holdings to avoid this tax.
In theory the US could go very far taxing a much smaller base because it has allowed so much money to be redistributed to this tiny base.
But even ignoring that your comment is unnecessary. Even if a Sweden like social democracy is the goal (which it doesn’t need to be…there’s many stopping points in between), the US doesn’t need to do it overnight. Raising taxes on the richest and then increasing the tax rates on lower brackets gradually over the decades as needed is an absolutely fine way to head in that direction as well.
for years there have been fewer and fewer of those "regular homeowners" and increase in offshore money speculation, purchase-to-AirBNB, and other non-obvious transactions. A recent examination of US Tax filings (posted on YNews IIR) show that +1 million adults in the USA have the financial ability to purchase a home, and have not done so.
That doesn't seem like a good measure. There are a lot of people with means who would rather rent a space downtown that own a SFH in the suburbs. Those people would/should not be considered "regular homeowners".
I'm going to hire for AI roles remotely. 100% of our ML hires have been outside of California.
Unless you know something specific that is getting in the way.
I won't hold my breath until there's some actual action - I don't count taking requests for information from people as action. I definitely hope they move quickly (and FWIW I like Breed and I think she's done as good of a job as anybody could expect in what is an impossibly hard job), but years of living in SF have taught me that pessimism about the city getting things done is the right frame of mind.
The CEO was in SF and said that SF properties have lost as much as 52% of business, where NYC (where they own a bunch of properties as well) will lose ~2-4% of bookings business...
He stated that after evaling SF - he said it will be back to normal after FIVE TO SEVEN YEARS. Maybe longer.
So, SF - is going to be a billionaire realestate cluster as hedgies swoop in for depressed prices.
So, the overall "slurped up" (as opposed to 'trickle-down') economy is really weak currently, and they are not seeing a positive return for a while, thus - Market street is going to suffer.
Let make Zuck and Ellison and Benioff (the largest land owners in Hawaii) convert/rebuild Lahaina - but provide some housing in SF for refugees... :-)
https://www.cbsnews.com/news/park-hotels-leaving-san-francis...
Good time to be a small business. Bad time to be a landlord. Landlords don't create value, small/medial/large businesses create value. And excess rents are a real impediment to actual productive businesses.
So rents in SF/Bay Area dropping would be very beneficial to San Francisco.
Please explain your logic because it doesn't seem to match reality.
From what I see, there can be 3 types of landlords: those who built a house from scratch (obvious value creation), those purchased the house from someone else (value transfer; but that needs the buyer to hold alternate value in the first place) or inheritance (yeah, one just got lucky with right parents).
Only the 3rd category seem to match your statement and I agree that inheritance should be heavily taxed. But the first 2 categories? Landlords have literally created value or exchanged their created value for a house.
That's called a developer not a landlord.
> those purchased the house from someone else
Transfer of ownership doesn't create anything.
Once the cost of living difference between SF and NYC becomes large and well known enough, companies will start hiring more, or choose to start, in SF vs the current trend of picking NYC because talent will begin to prefer it.
Many of my younger friends have moved to NYC (or elsewhere) and they have told me they don't like the overwhelming tech culture that permeate the bay drowning out the rest of the culture. I could see that happening to Seattle as well, but probably not NYC.
I can kind of understand it being like competing colonies of bacteria (each sub-culture). I think its pretty valid, but I don't mind all tech all the time ;D.
I guess my line of thinking is that young professionals will eventually find SF trendy again once NYC becomes passé for being too expensive, overhyped, attracting too many of the charlatans and clout chasers. People love different parts of the country for many reasons but I think in aggregate SF is generally a number 2 choice after NYC for many young professionals if cost is not a (big) factor. Which is why I think if the trend continues and NYC gets more and more expensive vs SF, 23 year olds will start picking SF over NYC
I have ALWAYS been dumbfounded by how much per sf $
This scenario should be the posterchild for real-estate greed - NONE of these properties should cost this much - even if your lobby desks are built from 85,000$ Koa Wood Desks from hawaii that is illegal to harvest - and you have one of these in most of your reception lobbies on your MANY MANY floors (Salesforce)...
but here is the thing - all the businesses that died on Market and FiDi in SF - where high-end condos are all around, and other apartment buildings - there will be no walkability score for many of the apartments in those areas, and thus their prices should come down.
However, you'll notice that the building dropped 66% -- but any commercial (or residential) rental rates will certainly not decrease by that much (hedgies want to dump buildings (hence Park 55 and Hilton... with more to come)
-
Walkability is based on the ability to walk from residence to commercial, retail, grocery, entertainment, work, etc...
So if the first two levels of entire blocks of san francisco's market steet are all shuttered, non-interesting/iconic - why would you want to live anywhere near such an area.
Look at how lame the TwiXXXter building is now - all the shops that would have supported the employees are shuttered.
crappy vid, but informative of the number of shuttered places along market that just shows how depressing it is
https://www.youtube.com/watch?v=5UWIyGDnHmk
Why wouldn't they have (very high) walkability scores? Or do you mean that as commercial buildings they don't have walkability scores until some time passes, and prices will be lower than possible until the locations are scored?
I wanted to talk more about the sqft consumed by one of the Koa Wood reception desks I mentioned (These are desks made from Koa Wood - which is the treasure-wood of Hawaii, and you cannot harvest it - so you have to purchase an already-made-thing, then work it to your desired product.
This wood is super expensive (its going to sky-rocket due to the Maui fires (im sure some of those ancient stores had Koa things in them)
But to give you an idea:
The basic slabs that we installed in the lobbies of, say, 50 Fremont for salesforce - the thing was IIRC $~65,000k for a reception console top (with side curtains, live edge) - we roughly 24"x96" (I dont recall dimensions) --
EDIT - Apparently I am wrong on the purchasing of Koa, as you can get pieces - what I do know is that some of the receptions were made from older peices that were purchased and then rebuilt to the new format...
I do know they were >$65,000 - and I am trying to merge to follwoing sqft price for the area of both the desk and the sqft under it based on the $711 sqft price in SF + the cost of the Koa desk / its footprint...
So,
Assume
18x120 koa desk (made by a koa master in HI) $65000
Cost of raw materials (unknown)
sfqt cost in SF based on $(n) we will pick the $711 number and the other one.
Works out to ~20 SF at a price for just the actual flooring, at 14,220 per year. Then the cost of the wood can be calculated but doesnt matter at this point, that desk costs $~8.00 hr just to sit there (if it were available M-F, 8-5)
What is a trophy office? "Come look at this office I'm renting out because it makes me feel special!"