As San Francisco faces record levels of business vacancies, a mayoral candidate has rolled out a plan to reshape the city's business district and surrounding areas.
Former San Francisco interim mayor Mark Farrell is proposing a 20-year vision for downtown revitalization in an effort to help the city recover from challenges exacerbated by the pandemic. His plan includes a new park at Embarcadero Plaza and mixed-use buildings that provide more housing options.
He also proposes tax incentives for companies that move to the area, and for companies that require their employees to return to the office four days a week. The goal is to stimulate industries beyond technology.
“I’ve traveled around the world and in our country over the last few years for work, and other city centers have recovered from COVID,” Farrell told CNBC in an interview. “Unfortunately, our city is now ranked last in economic recovery post-COVID. And that, to me, is embarrassing and it has to change.”
Commercial vacancy in San Francisco hit an all-time high of 34.5% in the second quarter, up from 5% before the pandemic, according to a report last week from Cushman & Wakefield. Manhattan’s vacancy rate for the quarter was 23.6%. Farrell’s goal is to cut San Francisco’s vacancy rate in half by the end of the first quarter.
A key part of Farrell’s plan involves bringing workers back to the city. Many of San Francisco’s largest employers, including Sales force, Uber And visaMajor companies have embraced hybrid work, with employees coming in three days a week at best. Moreover, the tech industry has been hit hard by layoffs over the past two years, removing thousands of people from payrolls.
Under Farrell’s proposal, companies that move their headquarters downtown would get a tax credit on their gross receipts, as would companies that force employees to come into the office four days a week. Such orders have faced opposition in some cities, most recently in Philadelphia, where unionized city workers lost a bid to extend the in-person work deadline.
“Right now, if you come downtown, the problem is the lack of people; it’s just a shell of what it was in the past,” Farrell said. The incentives are designed to get “people back to work multiple days a week in the office to create that activity that will really drive the future of downtown forward,” he said.
Public safety is a major concern, with drugs and homeless encampments rampant in certain parts of downtown San Francisco. Farrell is calling for more police, adding that safety and street conditions affect every neighborhood, including downtown San Francisco.
Elon Musk announced Tuesday that he will move the headquarters of X, formerly known as Twitter, to Austin, Texas, from San Francisco. X had already been looking to lease most of its buildings in the city, and Musk posted on X on Tuesday, “I’m tired of dodging violent drug addict gangs just to get in and out of the building.”
Conventions and tourism have also been slow to return to the city since the lockdowns that began in early 2020. The park at Embarcadero Plaza will be part of a plan to bring some of that back, Farrell said. He envisions a clean, open park outside the ferry terminal to attract workers, residents and tourists. He likened it to Mission Dolores, a San Francisco landmark.
Photo commissioned by mayoral candidate Mark Farrell's campaign to show plans for a new “world-class” park on the Embarcadero in the future.
Courtesy: Farrell for Mayor, Gensler
For housing, Farrell’s plan includes “robust tax financing” and local incentives to speed up residential development as well as convert commercial buildings to residential. Farrell also seeks to increase height limits in neighborhoods including the Financial District, SoMA and Mission Bay to create “tens of thousands” of new units and residents, and encourage more housing in places like Union Square, which has recently lost anchor tenants including Macy’s and Nordstrom.
The idea is similar to New York’s Hudson Yards project, which opened before the pandemic, Farrell said. That project was criticized for its high cost but has since become a success story with fewer office vacancies than other Manhattan neighborhoods. Farrell said his proposal promises to be a revenue generator for the city, but it needs major projects.
“Right now the problem is downtown,” Farrell says. “We don’t have people working here. It’s a ghost town. What that translates to is a loss of sales tax revenue, and property tax revenue that goes down dramatically when buildings sell for 10 or 20 cents on the dollar. And ultimately, the resulting commercial property taxes create a huge hole in our budget here in San Francisco.”
Farrell is just one of a number of well-known local candidates, including current Mayor London Breed, philanthropist Daniel Lowery and Board of Supervisors Chairman Aaron Peskin. According to the city government’s website, 13 people have qualified for the November mayoral election.
—CNBC's Ari Levy and Jordan Novit contributed to this report.
