Before the pandemic hit, San Francisco had the highest building occupancy rate in the country. Now, most of the city's skyscrapers sit empty. Residents, many now working from home, cite "high prices" and "there's nothing to do" as reasons why.
SAN FRANCISCO (KGO) -- Walking through San Francisco's South of Market and Financial District feels like a ghost town.
90-percent of the city's workforce is working from home and people are leaving the city.
The ABC7 I-Team is digging into how this is impacting real estate.
Before the pandemic hit, San Francisco had the highest building occupancy rate in the country. Now, most of the city's skyscrapers sit empty. How long will it stay that way? Is all this emptiness driving prices down everywhere?
"It went severely over asking... $400,000 over asking," said Jason and Stephanie Hicks. "We were shocked."
In the midst of the pandemic, the two newlyweds decided to leave SOMA for a better value in Alameda.
"We are both working from home now," Hicks said. "We need more space."
The Hicks fell in love with a house in downtown Alameda and felt hopeful about the market.
"Ultimately, 85 folks were interested in the same property... We were shocked."
In this case, it's a seller's market in Alameda.
Real estate agents Neil and Daryll Canlas of The Canlas Brothers explain it varies depending on where you look in San Francisco.
"Property values have taken a little bit of a hit, but there are pockets... certain areas that are stronger than others," said Neil Canlas.
One pocket hit the hardest? South Beach.
According to an ABC7 data analysis of real estate data, there are 147 luxury condos on the market in South Beach.
"Comparing it to the last 5 years, it's really unheard of... it's so rare for any to come up," Canlas said.
In just the last two days, 25 people posted on the Rincon Hill (South Beach) Nextdoor feed stating they are moving out of South Beach citing everything from, "work from home," "high costs," and "there's nothing to do."
"It's all about supply and demand," said Daryll Canlas.
There's plenty of supply in Soma, South Beach, and Mission Bay. Of the more than 1,300 active listings in San Francisco, nearly one-third are in those areas.
With inventory high, prices are taking a slight dip.
Before COVID-19, the average listing price for a two-bedroom condo in South Beach was around $1.95 million. Now, the average price has dipped down $30,000 to $1.92 million. For one bedroom condos, the average price is down $15,000.
"We'll continue to see a vacancy rate, because people don't need to live in the city," Canlas said.
No need to live or work in the city, especially as some companies are gone for good.
We know that from San Francisco's building vacancy rate.
ABC7's data analysis shows at the end of last year, vacancy rates were 5.4 percent.
Now, vacancy rates are nearly 10 percent.
To put those rates in perspective, San Francisco's building vacancy is comparable to other major cities like Seattle and Boston.
"It probably seems much worse than it really is," said Robert Sammons, a senior researcher with commercial real estate group Cushman and Wakefield. "Most of these spaces have leases in place, long-term leases from very well-funded companies... that's the good part."
Sammons said most of the 7,500 companies leasing building space in the city and county have been able to keep their lease agreements during the pandemic. But, not all of them are as well-funded as others and these leases are six to seven-year commitments.
The question is - how much longer will those tenants last?
"That's the tough question," said Sammons. "Without a vaccine, without other things in place...we just don't know."
Assuming there's progress with a COVID-19 vaccine, Sammons anticipates companies (big and small) could start allowing 25 percent of employees back in the office by the fall. But, it will be gradual and depend on guidance from the city.
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