Small business owners in San Francisco are “hanging on” in hopes a recovery is just around the corner as foot traffic continues to languish thanks to tech workers who continue to work remotely or who have left town altogether.
Marshall Luck, who runs a chiropractic and massage practice in the once-bustling downtown district, told CNBC that his business is only back to 70% of the volume it generated before the spread of COVID-19 forced widespread lockdowns.
“Most of our patient population is the larger businesses, and as they return, it’s going to help us stay stable,” Luck told CNBC.
“That’s what we’re kind of hanging on for — that recovery.”
Luck and other small business owners who somehow managed to survive the past two years thanks to government aid and loans are desperate for large tech firms such as Google and Salesforce to bring employees back into the office.
Google wanted to force workers back to company offices in the Bay Area, but employee pushback forced management to offer more flexibility.
Salesforce, the software company that is San Francisco’s largest private employer, recently announced it was slashing the office space it owned in the city — the third time it was doing so since the start of the pandemic two years ago.
Earlier this week, San Francisco Mayor London Breed said she was “worried about the trend” of tech workers either leaving the Bay Area or staying but opting to work from home.
The city estimates that one-third of its pre-pandemic workforce has stayed away from the office. Last year, remote work and a flight of companies from the area resulted in a $400 million reduction in tax revenue, according to the Office of the Controller.
Meanwhile, offices remain vacant. The real estate research firm CBRE reported that the office vacancy rate in San Francisco rose in the second quarter to 24.2% — up from 23.8% in the first quarter. It is the highest vacancy rate in the nation among large cities.
Manhattan office space has a vacancy rate of 15.2% in the second quarter while downtown Atlanta is at 22.8%, according to CBRE. Chicago (21.2%), Los Angeles (21.8%), and Seattle (20.3%) also reported high vacancy rates.
“We’re slower than New York, we’re slower than Chicago, and it does have to relate to being so heavily dependent on tech,” Robert Sammons, a researcher for Cushman and Wakefield’s, told CNBC.
The empty offices have also sent commercial real estate property values plummeting by as much as 40% compared to pre-pandemic levels, according to analysts.