Dumped by fickle Big Tech, downtown needs real love News

“If she’s not enthusiastic, what’s the point?”

A wise old guy asked me that years ago after my attempts to impress a prospective date were unsuccessful.

I was recently reminded of that courtship experience because San Francisco appears to be stuck in its own dating rut. In this scenario, the city of San Francisco is the would-be suitor, and tech companies are the unenthusiastic. It’s been that way for a long time.

Last week Twitter announced it is letting go of a big chunk of its headquarters in SoMa — its 10th Street offices connected to its main Market Street building. Etsy also dumped office space last week, following Salesforce, Block, PayPal and others.

It hurts to see them all go. It feels like a rejection.

But Twitter is the one that sticks. The City threw itself at Twitter’s feet in 2011, when the fast-growing startup suggested it might move to Brisbane to escape payroll taxes and get cheaper real estate.

Mayor Ed Lee made keeping Twitter a top priority and cut the company and others a sweetheart of a tax deal to move into the area around Van Ness and Market streets. This newspaper called keeping Twitter “unusually important” in 2011, noting the company has an “international brand name and cool reputation,” and keeping the company here could “reasonably be a turning point powerful enough to finally spark positive energy back into the down- and-out neighborhood” of mid-market.

Did it work? Eh. For a while. There was a “Twitter effect” that pulled in other tech companies and gave restaurants and bars in Hayes Valley and SoMa a boost.

The same thing happened with the opening of Salesforce Tower at First and Mission. There was excitement. The biggest mixed-use building west of Chicago! The SoulCycle studio at its feet was packed every weekday evening, and so were the bars nearby.

But I’ll let you in on a little secret: I worked in Salesforce Tower for a while, and it was never very full. If you got off the elevator on to the wrong floor, it was often so empty we used a word you hear said about vacant parts of downtown a lot these days: It was eerie.

That could also be true about the Twitter Building, a 1-million-square-foot barn that literally echoes with emptiness in places. Remember, that was in the good times — when we think of all the buildings in downtown as being full. That’s because it is very, very difficult to gauge office space needs for fast-growing tech companies.

“They had to take a lot of office space in advance of needing it, because they were hiring so rapidly,” says Colin Yasukochi, executive director of tech insights for the commercial real estate company Coldwell Banker Richard Ellis. “It was constantly a moving target.”

So, imagine trying to figure out office space needs for tech companies now, with COVID hanging on, hybrid work constantly in motion and a possible recession on the horizon. Downsizing isn’t about tech companies rejecting San Francisco. It’s about COVID and the economy.

“Everyone’s asking, ‘How much space do we need?’ Some companies want to get people back two to three days per week. But what does that mean for office space needs?” Yasukochi says.

No one knows. But somehow, if big tech companies stay, that will fix everything. Just like in 2011. If the cool person or company loves us, everything will be great.

Keeping big tech in San Francisco is not the big answer — and maybe it never was. When the “Twitter tax break” ended in 2019, The City estimated it had lost $70 million in payroll taxes in exchange for returns on investment that were unclear.

“Twitter benefited enormously and disproportionately from this tax break,” Supervisor Gordon Mar, a longtime critic of the tax cut, told me in an email. Meanwhile, “mid-market continues to face immense challenges. Those challenges require more public investment, not less.”

A Twitter spokesperson said, “We remain committed to our San Francisco employees, customers, and the city.” Twitter was one of dozens of companies that benefited from the temporary central market tax exclusion, the spokesperson pointed out, saying it “has revitalized parts of the city.”

“We continue to call San Francisco our home and our roots remain strong here,” the spokesperson said.

There’s not one big answer — keep big tech in downtown. Most of the workers are at home anyway, and many are not in the Bay Area.

But there are signs of hope for revitalizing downtown. Yasukochi, the tech expert for the real estate firm CBRE, says that while many tech firms are downsizing their office space, some are also upscaling it in a “flight to quality.”

CBRE shows that in downtown San Francisco, vacancy rates of the best, “prime properties” (12.9%) are about half that of other properties (24.9%).

Yasukochi says that’s because companies want a “welcoming environment” so that in-person work emphasizes quality over quantity.

“These newer offices have better amenities, the latest technology to incorporate, perhaps more meeting rooms, and less cubicles,” he says. “So when you’re at the office, you’re kind of like, ‘Wow, I’m at the office!’, as opposed to ‘Oh, I’m back at this office that I’ve been coming to for years, and it’s still a dreary place’.”

The cybersecurity company Okta has based new hybrid work offices near Salesforce Park on Apple Stores, with work stations that are easy to drop into for quick collaboration. Employees stow their things in lockers, rather than being tied to one desk.

Better offices for hybrid work are incentives for tech to be downtown — but tech workers, not big companies. Tech workers are the ones who help revitalize downtown. And tech companies pay for better offices. Taxpayers don’t.

The answer is not to push tech workers back into the office, as Mayor London Breed did in March, asking tech companies to sign a “pledge” to implement return to in-person work policies.

Let’s incentivize the little guys for a change. The restaurants and bars and shop owners in downtown have been hit the hardest. Many of them didn’t have the option of moving or downsizing.

It would be great if technology would help with that. Perhaps by coordinating three-day in-person work weeks so that neighborhoods know when workers will be buying lunches and beers after work. And giving their employees stipends for downtown restaurants and shops.

Mar says tech’s help is needed in many ways.

“We absolutely need collaboration and partnership from the tech industry to revitalize downtown — but we don’t need more corporate welfare,” he says. “We need to clean our streets, build more housing, support small businesses, and invest in downtown arts, culture, open space and public safety.”

That would give all San Franciscans incentives to revitalize downtown.