You've been hearing for over a year from the businesses downtown that used to host busy lunch crowds and happy hour hordes that the area is a ghost town most days. But it's not just because the companies that are still there are letting everyone work from home.
Office vacancy has been pretty high in San Francisco for many months, but new data for the fourth quarter of 2022 just came in showing that vacancy hit another pandemic-era high of 24 percent, up from 23 percent in the previous quarter. As Socketsite reports, via data from real estate firm Cushman & Wakefield, that represents around 21 million square feet of offices sitting empty.
Also, demand for office space continues to be down around 20%.
21 million square feet, just to get your mind around that number, is the equivalent of many, many empty buildings and whole floors of buildings. In fact, with Salesforce Tower's 59 stories of offices coming in at 1.35 million square feet, this means that 15.4 Salesforce Towers worth of offices are currently vacant in SF, as Socketsite explains.
Or, to illustrate it another way, you take one empty floor of Salesforce Tower and multiply by 909 — that's how many office floors are devoid of activity, in downtown and elsewhere in the city.
Salesforce itself has been subleasing space that it formerly filled with its own workers, offloading hundreds of thousands of square feet in buildings near its eponymous tower in the last two years.
Commercial real estate firm CBRE noted in December that San Francisco's office vacancy rate had just hit its highest point since 1993. They actually put the vacancy number higher than Cushman & Wakefield, saying it is 27.1 million square feet — or the equivalent of 20 Salesforce Towers.
"The issue started with the pandemic," said Colin Yasukochi, CBRE’s executive director at its Tech Insights Center, speaking to CNBC. "Prior to the pandemic, in the city of San Francisco, our office vacancy rate was about 4%. Which meant that 4% of all the space, the millions and millions of square feet of space that we had in the city, were vacant. Today, that number is more like 26%."
Last fall, as office vacancy numbers continued to rise in the city, former city supervisor turned Assemblyman Matt Haney began promoting a proposal to convert empty office buildings to housing — however that notion probably involves many, many years of wrangling over zoning changes, identifying which buildings would be best suited for housing, and then the actual renovating and retrofitting of those buildings.
SF-based architecture firm Gensler undertook such a theoretical project for the city of Calgary, as KRON4 reported. They ultimately identified a group of buildings from the 50s and 60s with plenty of access to light and easily convertible floor plates.
One expert speaking to the Chronicle last fall suggested, though, that given current construction prices, projects like this — like the conversion of 100 Van Ness to rental units a decade ago — are infeasible in current economic conditions. They may become feasible, though, if the costs of building materials and local permitting delays were to "fall off a cliff."
Previously: SF Tech Companies Losing Hundreds of Millions on Office Space They Can’t Rent
Photo by George Eiermann