(ZeroHedge) San Francisco’s office vacancy rate has risen to a record 25.5% at the end of Sept., up from 20% a year earlier, according to Bloomberg, citing new data from real estate brokerage CBRE Group Inc. The amount of vacant office space surpassed levels after both the 2008 Great Recession and the dot-com bust.
CBRE said that the city’s office vacancy rate was about 4% at the virus pandemic’s start. By September 2021, the rate was 20% and has since increased to 25.5%.
Workers have been slow to return to the city’s downtown, with weekly office utilization less than 40% of the pre-pandemic average, according to security company Kastle Systems. Office values in the San Francisco area have tumbled almost 40% on a price-per-square-foot basis from a high in December 2020, according to MSCI Real Assets.
The data suggests several forces driving this phenomenon, including remote work and the growing appeal of tech companies moving operations beyond San Francisco, even out of state.
Cities like Austin, Texas, and Miami, Florida, have been luring tech companies from the Bay Area with lower taxes, affordable housing, higher-quality public schools, and, of course, less crime.
Some Bay Area neighborhoods and street corners are overrun with homeless people and Fentanyl addicts, it’s tough for a tech company to attract new talent to an area where living costs are astronomically higher than the rest of the US, and parts of town resemble a third-world country.
Then there’s the Federal Reserve-induced market turmoil, leading large and small tech companies to quickly reduce costs by downsizing their workforce and slashing office space.
Facebook parent Meta, Google, and Amazon are some tech giants that have instituted hiring freezes.