Lowering downtown SF real estate values could have 'profound impacts' on city budget, official says

ByLiz Kreutz KGO logo

Friday, April 28, 2023

Lowering downtown SF real estate values' impact on city budget

Lowering downtown San Francisco real estate values could have "profound impacts" on the city's budget, Supervisor Aaron Peskin said.

SAN FRANCISCO (KGO) -- Around lunchtime on California street this Thursday, downtown San Francisco appeared to be busy and bustling. But look a little closer, and you'd see the signs all around: "Retail Space for Lease," one read.

Right now, roughly 30% of all downtown office space is vacant in San Francisco. According to data from Coldwell Banker Richard Ellis, it was just 3% in 2019 before the pandemic.

Among those vacant offices is 350 California Street -- a 22-story tower that once sat on some of the most valuable commercial real estate in the country. But now, according to the Wall Street Journal, the building may be valued 80% less than it was four years ago.

MORE: SF launches 'Vacant to Vibrant' program to fill downtown vacancies with pop-up shops

The WSJ reports that the building was worth around $300 million in 2019. And that, now up for sale, bids are expected to come in at about just $60 million.

The story of 350 California Street is an example of just how dire the situation has become downtown as tech companies move towards remote work and vacate the once booming downtown area.

"A lot of people are working from home at least part-time and I don't think we're ever going to put that genie back in the bottle," San Francisco Board of Supervisors President Aaron Peskin told ABC7 News. "And the reality is that rolls down into the value of office buildings."

The sale of the 350 California Street building could set the rate for other commercial real estate in the area. Peskin said the lower value of these buildings will have a big fiscal impact on the city.

MORE: San Francisco officials introduce plan to convert vacant downtown offices into housing

"There are two geese that have laid the golden eggs for San Francisco," Peskin said. "The tourism industry that is rebounding. And the other was the downtown office economy."

"And that one is in more trouble, and it's going to come with profound financial impacts to San Francisco government's tax base," he explained.

Peskin says this year's city budget is projected to be slashed by a quarter of a billion dollars and next year by another half billion.

"We're going to have to live within our means. We will balance our budget on time within the revenues we expect to get and it's going to come with hits to city services," he said. "And none of that is going to be fun or pleasant. We're going to have a lot of tough decisions to make between the board and the mayor."