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In Praise of San Francisco

There’s something that happens when people start declaring the decline of a city. The negative stories pile up, each one feeding into the same narrative. San Francisco is the latest victim of this city-shaming. The idea that “the global tech industry’s center of gravity” needs to be defended against claims that it is too unsafe—or too expensive—to thrive, seems surprising. But these beliefs about San Francisco continue to swirl around unchecked, so let’s get them out in the open.

Myth #1: San Francisco is unsafe. San Francisco’s violent crime rate has plunged since the 1990s, and the city has a low violent crime rate compared to other major cities.

Myth #2: Retail stores are leaving the city because of crime. Big, mall-style retail stores are losing foot traffic everywhere, and that’s leading many retail stores to abandon downtown spaces, leaving lots of vacancies in San Francisco and other cities.

This is not to say that San Francisco is not without its troubles. Like other major cities, the COVID-19 pandemic and rise of remote work caused a lot of companies to abandon or downsize their downtown workspaces. That’s had a major impact on commercial property sales and leases—reducing prices and taxes along with them.

But analysts are already seeing signs of a revival, and on the streets of the city there is a palpable “buzz” which to many feels similar to 2010.

San Francisco is host to the annual JP Morgan Healthcare Conference—the most sought-after national healthcare investment event—for a reason. It is the premier city for venture capital investment—home to Y Combinator, Andreessen Horowitz, Sequoia Capital, Accel Partners and others. And San Francisco is also the world’s leading tech hub—with Google, Salesforce and Facebook leasing hundreds of thousands of square feet of office space. Not surprisingly, the city is a magnet to tech startups who want to be close to top talent, networking, collaboration opportunities, and investment.

Now, generative AI startups are setting up shop in San Francisco too—drawn to its VC dollars and AI talent. Leases from AI startups in the city rose 46% in 2023 to 3.6 million square feet—a number that’s expected to rise to 12.5 million by 2030. In fact, one third of all leasing activity in San Francisco in 2023 was from AI companies and major new deals, which include Anthropic and the much buzzed about OpenAI, maker of ChatGPT.

Garry Tan, CEO of Y Combinator, who moved his firm’s headquarters from Mountain View to San Francisco last year, said it best. For founders who want to be part of the next tech revolution, “you sort of have to be in San Francisco.” In San Francisco, he said, “Chances are the people around you are thinking about and talking about technology, and especially AI. That’s really special.”

Innovation is what San Francisco does best, points out Nadeja Adams, Senior Workforce Programs Specialist at TechSF, a program affiliated with the Department of Labor that is creating upward mobility for local talent and businesses in San Francisco. “Change is not an anomaly for a city fueled by groundbreaking innovation and disruption,” she says. “The Department of Labor continues to invest billions of dollars into the Workforce Innovation and Opportunity Act (WIOA) to scale workforce development, and through strategic allocation of this funding, we plan to operationalize WIOA to develop talent for the skills needed by our local businesses.”

As more tech and AI companies expand their operations in the city, they provide a pipeline to local schools and organizations, elevating the surrounding community as well. That’s the perspective offered by the San Francisco-based organization, and Hughes Marino client Dev/Mission which partners with local tech companies to offer skills training and develop tech talents among underprivileged groups.

“We believe that everyone deserves the opportunity to participate in the digital economy,” says Leo Sosa, Founder and CEO of Dev/Mission. Sosa is on the front lines of both tech growth and community empowerment, and he describes himself as “very optimistic” about San Francisco’s future. “We see how technology continues to be all around us but, most importantly, the opportunities we can create with our newest space in the SOMA in San Francisco for young adults to be exposed to STEAM Careers.”

Abundant San Francisco, a nonprofit political group and Hughes Marino client led by Todd David, former Executive Director of the Housing Action Coalition, and Zack Rosen, co-founder and CEO of the website platform Pantheon, also sees enormous promise for the city’s future. The organization has brought together a coalition of stakeholders—including many in tech—focused on advancing housing and land use policies.

“As Mayor London Breed said in her State of the City address, ‘Never count San Francisco out,’” the group wrote. “We see signs of turnaround everywhere in San Francisco, whether it’s as the AI capital of the world, improved public safety outcomes, a roadmap for revitalizing downtown, or the most recent election. We are increasingly confident that San Francisco’s best days are ahead of us.”

All that positive momentum and available space means San Francisco real estate is positioned as a major opportunity for tenants right now. Investors like Goldman Sachs are already starting to buy up distressed real estate in anticipation of the coming turnaround as are established local owners like The Swig Company who have patience and are doubling down in the city. Plus, up-and-coming startups and professional firms who have been ingrained in San Francisco’s Financial District for decades of both boom times and bubbles, now have an opportunity to establish themselves in the city at significantly reduced rates and favorable lease terms.

While office vacancy has soared in San Francisco at 36.2% the fact is, San Francisco’s unique features—from tech talent, to restaurants and culture, to unbeatable views of the bay’s natural beauty and bridges—ensure that it will continue to be a draw. What companies need to do now is act quickly to take advantage of the tenant market before the word gets out.


Cameron Love is an executive vice president of Hughes Marino, a global corporate real estate advisory firm that specializes in representing tenants and buyers. Contact Cameron at 1-844-662-6635 or cameron@hughesmarino.com to learn more.

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