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DevelopmentWhy SF's downtown is not coming back

Why SF’s downtown is not coming back

For more than 50 years, SF mayors and their allies have pushed highrise office space, destroying anything in its path. They were wrong, and now we are paying the price.

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 Karen Chapple, an eminent professor of urban planning who has worked in SF, taught at UC Berkeley, and is now at the University of Toronto, explained in the Chron July 30 why downtown San Francisco remains so empty after the pandemic.

Her analysis is exactly right—and completely misses the political point.

Is there such a thing as too much office space? Yes, but for more than half a century city policy ignored that.

In fact, she breezily excuses half a century of corrupt, faulty, and failed city planning and holds nobody accountable for what many of us have been saying was a serious disaster for a long, long time.

Her point is hard to ignore:

Just one factor differentiates downtown San Francisco from the others: its lack of economic diversity. San Francisco has become overly specialized.

This is not rocket science. Decades of economic studies have shown that the most resilient economies are diverse, and cities that overspecialize are particularly vulnerable to shocks.

San Francisco’s downtown has 31% of its jobs in professional, scientific, and technical services — a category that comprises law, accounting, advertising, architecture and consulting firms, as well as computer systems design — i.e., the types of firms where highly skilled professionals work alone productively, and are thus well-suited for remote work. In comparison, just 18% of downtown workers in New York are in this sector. Compounding this, over 9% of San Francisco’s jobs downtown are in information, double the share in Boston.

Yes: San Francisco has become overly specialized. It became overly specialized years ago, when generations of mayors, starting with Dianne Feinstein, decided that office development was the future and that all the other uses of downtown land, from a working port to manufacturing, arts, and light industry didn’t matter and should be tossed out and discarded.

Feinstein liked the finance, insurance, and real-estate sectors and the big developers who built their glass-and-steel headquarters (and funded her campaigns). So did Willie Brown, who even approved office development in the Mission, and Gavin Newsom. Ed Lee loved the tech industry, and did everything possible to let tech offices expand.

Newsom and Lee also loved highrise luxury housing.

In every instance, that came at a cost: More office space and million-dollar condos means less of everything else.

The type of “diversity” that Chapple describes can’t possibly compete with the land prices and rents high-end offices and condos can bring.

When I arrived in San Francisco in 1981, Soma had a thriving printing industry, providing decent blue-collar jobs to thousands of people. But printing takes affordable space, and when developers decided they could make more money destroying that industry to build offices, Feinstein happily went along, sending highrise development from the Financial District into Soma.

The city had lots of other light industry, and artists colonized warehouses and turned them into thriving communities. There was thriving small retail on the edge of downtown. But that land was, as the late Redevelopment Agency Director Justin Herman once noted, “too valuable for poor people to park on it.”

In 1985, when I was working at the Bay Guardian, we hired an MIT economist named David Birch to study job creation in San Francisco. His conclusion: Small, locally owned, independent businesses were much better for the local economy than highrise offices.

A diverse economy, we pointed out way back then, was far more resilient to what were inevitable economic shocks. Cutting-edge economists at places like the Institute for Local Self Reliance demonstrated with irrefutable data that monocrop economies in cities were too vulnerable.

Nobody in San Francisco government cared. The march of office space and the demolition of everything else continued apace.

Under the Reagan Administration, the deregulation of financial institutions led to massive real-estate speculation, and when the inevitable crash came, it deeply damaged cities like Houston. San Francisco was less hard hit—because in 1986, voters (over the fierce objections of Feinstein) approved Prop. M, which slowed office development.

But by the 1990s and the first dot-com boom, the developers, with the full support of Mayors Brown and the Newsom and later Lee, found ways around the rules. They took existing PDR space and illegally turned it into offices, while the city looked the other way. (The real winner of the Twitter Tax Break wasn’t Twitter; it was the owner of the building, which by law was warehouse space but became offices without paying any of the required fees.)

You could see this playing out at 660 Third Street in 2004—an example of how the city refused to stop the tech industry from colonizing what should be PDR space.

That building, and so many others in the Soma area, was zoned for PDR use. No office space allowed. Converting a PDR building to office use involves a new permit—and the owner has to apply under the city’s existing office limit, and pay all of the very significant fees for Muni service, schools, etc.

It’s a lot of money. The city consistently fails to collect it.

But there’s more here than fees.

“Diverse” uses require “diverse” rent levels—that is, PDR and artists and all the things that Chapple says help downtowns survive can only happen if landlords aren’t able to drive them out.

Zoning is a tool to control rent. You zone a site only for light-industrial use and the landlord can’t charge $50 a square foot, since only office tenants (with a lot of people packed into the space) can afford that.

Big landlords and developers hate that; they want to maximize every dollar they can get for every inch of land.

If San Francisco had set aside large parts of Soma, for example, as nothing but PDR, instead of allowing downtown to expand into that area in the 1980s, there would be a lot more “diversity” today, and a lot less of a crisis.

The point here is that the crisis we face today was caused (or at the very least, made much worse) but policy decisions made by mayors and planning commissioners and supervisors who were warned about the downside and moved to an office monocrop economy anyway because it was better for the real-estate industry.

The developers and commercial landlords made a fortune in the process, and helped fund and elect Mayors Feinstein, Brown, Newsom, Lee, and Breed. Those mayors helped them make and keep their big money.

They were aided and supported in that process by organizations like SPUR and the Chamber of Commerce, which are now complaining that downtown is dying and something has to be done.

But proclamations by the mayor that people should go back to work aren’t going to make much difference. The city needs to repurpose the downtown area, to undo some of the damage that the Manhattanization of San Francisco caused over the past half century.

That will require new zoning rules—and there is no way it can happen without the existing commercial landlords and developers losing some of their wealth.

Some of those office buildings can’t be offices in the longterm. One of the first things I would do is rezone parts of downtown for arts use—no office use, just visual and performing arts studios and spaces—and try to attract artists from all over the world to come here, the way Ed Lee sought out tech companies.

It’s hard to turn office space into housing, under current rules. But artists have a long productive history of taking over underused commercial space and turning it into live-work studios and performance spaces.

That will only work if the rents that the owners get are far, far less than they are used to. The very, very rich companies that own much of the office space downtown, who include Donald Trump and who are scamming millions a year under Prop. 13, will have to take a financial hit.

In fact, no matter what the city does to “revitalize” downtown, it’s going to cost the real-estate industry money—or it’s not going to work.

Nobody today is holding any of the former mayors who created this situation accountable (although all of them were warned repeatedly by many urban environmentalists, who were right then and are right now). Perhaps future mayors will listen.

In the meantime, let’s face facts: The big developers and landlords (many of whom are out-of-town operations) have to lose for the city to win.

And maybe it’s time for SPUR and the Chamber to admit that they have been very wrong for a very long time.

48 Hills welcomes comments in the form of letters to the editor, which you can submit here. We also invite you to join the conversation on our FacebookTwitter, and Instagram

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

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