San Francisco Chronicle - (Sunday)
Downtown wonders whether it can survive
For 20 years, Adam Smith, owner of San Francisco newsstand Fog City News, told employees and customers one thing before they left his store at Market and First streets.
“You’re going on a highway that is Market Street. Be careful or you’ll be trampled by people,” he would say.
No longer. The coronavirus pandemic has turned downtown San Francisco, once bursting with workers and tourists, into a ghost town. A nearly decadelong boom that fueled record low unemployment and the highest average
Stopping service:
Tadich Grill, San Francisco’s oldest restaurant, shutting down for the foreseeable future.
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real estate prices in the country has come to an abrupt end. More than 150,000 San Francisco residents have filed unemployment claims this year. Apartment rents have dropped over 10% from last year, according to real estate data firm Zumper.
Under the city’s health order, nonessential office workers must stay away, with no timetable for restrictions lifting. Restaurants can provide takeout service, but many remain
closed. With coronavirus cases on the rise, large employers like Salesforce, Facebook and Microsoft are allowing U.S. workers to stay home until at least the end of the year. Last week, Google extended working from home until July 2021.
The absence of tens of thousands of office workers raises questions about the future of San Francisco’s downtown. Tech growth shifted substantially from Silicon Valley to the city, but now tech darlings like Uber, Airbnb and Yelp have laid off many of their employees because of the pandemic. BART ridership was down nearly 90% systemwide in July from where it was in February, while the number of Muni bus riders has fallen by about twothirds over a similar period.
A lot of the “end of cities” rhetoric is overblown, said
Aaron Renn, an urban policy consultant in Indianapolis.
“Places like San Francisco are taking a hit, but it’s such an attractive place to work and live, it’s going to bounce back,” Renn said.
But the extent of the economic damage remains unknown.
At Fog City News, revenue has declined 70% without regular foot traffic, Smith said. He has cut his staff in half and offers only curbside pickup, even though San Francisco permits stores to allow shoppers inside.
Bonnie Stuppin, coowner of Alexander Book Co. on Second Street, doesn’t know if her bookstore will survive to see its 30th anniversary in November.
“The last few months have been terrible. There’s no way you can watch your sales drop 80% and keep going. It’s not a sustainable model for retail,” she said. Online sales and curbside pickup have helped, she said, but bring in nowhere near the revenue that inperson sales did.
“It’s eerily quiet now, something I’ve never seen before,” she said. “We’re all in the same boat. We’ll give it a few more months and see what happens.”
Downtown revivals across the country began in the 1980s, as residents flocked to cities instead of the suburbs. The population in downtown San Francisco grew 67% over almost four decades, from 53,000 in 1980 to approximately 89,000 in 2018, according to a recent Brookings Institution report. In the past decade, numerous office and residential towers have been built in the Transbay district, extending downtown’s reach.
But now, the engine of urban economic prosperity, density, is suddenly one of the greatest risks for coronavirus infection, and running a business is a
struggle for survival. Michael Buich, owner of the famed Tadich Grill, the 171yearold seafood restaurant on California Street, sought to keep his staff of 35 employed. But delivery revenue was a trickle compared with that of dinein service, and the restaurant closed Friday until indoor dining returns.
“We had to do a complete 180 and change our operating model to solely focus on delivery, when we hadn’t optimized our business for that in the past,” he said by email. “For a white tablecloth restaurant, it’s a very different model to rollout in such a tight time frame, and frankly, it didn’t make a big enough impact for us to continue.”
Tadich Grill received aid from the federal Paycheck Protection Program, but the money ran out, and the Buich family had to cover expenses such as supplier costs, property taxes and insurance out of pocket.
Zaid Ayoub, coowner of SAJJ Mediterranean, a restaurant chain based in Belmont, closed his downtown San Francisco location when shelterinplace orders were announced in March. Delivery and catering had been a steady
business prepandemic, but no longer. “There’s nobody there,” Ayoub said.
A Menlo Park location is also closed, but 11 locations in the Bay Area are open, largely thanks to residential customers and online business, he said. Still, there’s a risk that some locations could close permanently.
There’s great uncertainty on when office workers return, and leasing activity froze between April and June, as San Francisco recorded the fewest new deals on record, according to brokerage Cushman & Wakefield. But major landlords remain bullish on the future of the physical office.
Boston Properties, San Francisco’s largest landlord, said tenants across the country want to get back to the office and are seeing flaws with working from home.
“Many of our tenants ... believe it is not a longterm sustainable substitute for inperson work. As time wears on, it is increasingly clear to business leaders there are widening gaps for their companies in activities such as collaboration, creativity, training, mentoring and the building of company culture, when all employee communication and
connection is virtual,” said Owen Thomas, CEO of Boston Properties, in an earnings call last week.
Twitter and Square, whose San Francisco offices in the MidMarket area aren’t far from downtown, are letting employees work from home permanently. Real estate listings company Zillow Group, which has about 500 San Francisco workers, became the latest tech company to adopt a permanent workfromhome option last week.
But in a hopeful sign for downtown businesses, Zillow will keep its 535 Mission St. office in the Transbay district. Some employees want to return when they are allowed, at least parttime.
“Prior to the pandemic, I always had a strong desire to be fully remote, that seemed ideal. But having done this since March, it’s really helped me realize how much I love being in an office and being present with coworkers,” said Iren Lyon, a Zillow senior program manager of learning and development.
Zillow’s policy to allow remote work but keep an office downtown is an ideal balance, she said, allowing her to one day patronize downtown res
taurant favorites like Archive Bar & Kitchen, Spice Kit and La Mar.
San Francisco officials are grappling with how to mitigate the damage to retailers and restaurants, both downtown and citywide. Mayor London Breed has introduced a November ballot measure that would require city staff to process retail permit applications within 30 days, compared with the current monthslong process, and allow nonprofits to open offices in groundfloor spaces in neighborhood retail districts — a tacit acknowledgment that not enough stores may return.
Jonathon Kass, a fellow at San Francisco think tank SPUR, said adopting more flexible zoning is a good step. “The need for nimbleness and flexibility, I think, rises to the top,” he said.
But David Prowler, a real estate consultant and former city planning commissioner, would like to see the city go further, such as allowing offices to operate in ground floor spaces in downtown.
“I think we’re way too prohibitive,” he said. “The world has changed so much, and we were never able to keep up.”
The city has limited tools for
business aid, he said, as it faces a $1.7 billion deficit over the next two fiscal years. Meaningful financial aid will have to come from the state and federal governments, he said. The restaurant industry is pushing for a $120 billion national fund for independent restaurants.
There is a silver lining to the current crisis, he said. Rents may continue to drop, allowing new residents to come to San Francisco. Those who were here primarily for a highpaying job without being civically engaged can move somewhere that they prefer, he said.
Prowler notes that New Orleans recovered after Hurricane Katrina and Hiroshima recovered after the 1945 atom bomb, testaments to the resilience of cities. But the current recession is global and a vaccine remains, optimistically, months away.
“I think we’re in for a rough couple years on all levels,” he said. “Downtown will have to evolve.”