Over the past decade, startups have migrated north from Silicon Valley to make San Francisco the nation’s hottest tech hub. The city’s streets were bustling with — mostly tech — workers walking or catching Ubers to their next meetings.
Then the COVID-19 pandemic hit and things ground to a halt. Now, more than two years and several vaccinations later, San Francisco’s office scene still hasn’t rebounded, and the city’s streets are eerily quiet.
If you think it’s less than other cities you’ve visited recently, you’re right. According to Colin, San Francisco sees some of the lowest absenteeism rates for office workers in the United States Yasukochi, executive director of real estate brokerage CBRE’s Tech Insights Center. Silicon Valley is not far behind.
The region’s heavy reliance on tech workers has also slowed its recovery, as many local employees continue to insist on remote work and employers begrudgingly allow it.
Tch companies, said Yasukochi, There are “ThIn terms of providing flexibility and not requiring their employees to return for any number of days. Some definitely are [asked staffers to come back]. But what is their approach and what is their compliance are two different things.
He said: “They say you have to come back three days a week, and if you only come back two days a week, or one day a week or not at all, what are they doing to enforce that? And the answer to that question is, not much at the moment.
Why lean around the problem? Well, while the tech industry has seen tens of thousands of workers laid off in recent months, Yasukochi points out that a still-robust labor market that offers employees plenty of options has had a “disproportionate effect” on remote work practices. .
As he explains, “It’s still very difficult, unemployment is very low, tech workers are traditionally hard to hire, and many employers are worried about accelerating the normal turnover they already have.”
Bottom line, they’re scared. And startups aren’t the only ones worried about losing employees. Some of the largest and most powerful companies have scaled back or at least delayed their return to work plans due to pushback they received from their employee base. Examples include Apple and Google, among others.
So how low are office worker attendance rates in San Francisco?
According to Kastle access control, in mid-to-late August, San Jose had the lowest attendance rate at 34.8%. San Francisco, including the East Bay and Peninsula, is not far behind at 38.4%. In contrast, emerging tech hub Austin’s attendance rate was 58.5% in mid-August.
As the supply path increased, rents decreased slightly
Even though fewer workers are actually moving into the office and the amount of supply on the market in SF has increased dramatically, rental prices have only fallen 13.1% since the first quarter of 2020 — to an all-time high of $88.40 a square foot. to $76.86 annually in the second quarter of 2022, according to Yasukochi.
The San Francisco office market is surprisingly 4% vacant. Now 24% is vacant.
Meanwhile, vacancy rates in San Jose stood at 6% at the end of 2019. They are now at 12.5%, which is “not too high compared to the city”. observed Yasukochi. And office rents remained the same compared to the end of 2019.
If you’re wondering why San Jose fares better than its northern neighbor, Yasukochi says he owes it to the types of businesses in both cities. San Jose is home to stalwart businesses like eBay and PayPal, which were founded two decades ago. San Francisco has less established startups that are having a harder time surviving and thriving in the pandemic, from companies involved in mobility and transportation to retail to restaurants.
“When the shutdown happened, business went south, and even though they recovered, a lot of people laid off and downsized office space,” he told Technology Flow. “And when many companies first decide to go remote, they need much less office space than before.”
Either way, the employees have the upper hand for now. But things will gradually change, Yasukochi believes.
“The pendulum swings in different directions based on different conditions in the market,” he said. “We will eventually start to see more influence in the hands of employers The labor market may be easing slightly, although there is no sense that the labor market will change dramatically anytime soon.”
In the meantime, the question on many people’s minds is why — with the ongoing housing shortage and oversupply of office inventory — more office buildings aren’t being converted to residential units.
Yasukochi suggests that some space could potentially be converted in the future, but right now, it’s a bittersweet prospect for commercial building owners.
“WeIt’s nowhere near that yet because the values of these buildings have to drop dramatically,” Yasukochi said. “If you bought your building at a certain price — say $700 or $1,000 a square foot, you don’t want to sell it at $200 or $300 a square foot to make a residential conversion possible.”
“It’s perfectly logical to put it to a more productive use, but tell the person who paid for it — they’ve got to take the damage, right?”
Perhaps landlords have reason to hope. Not all employers in San Francisco allow employees to work from home that much.
Information recently reported that startup Merge “has been selected All to go on personal work.” Organization – It aims to cater to B2B enterprises A unified API for accessing data From dozens of HR, payroll, recruiting and accounting platforms — It mandated that all its employees be in the office five days a week, a rarity in the Bay Area.
Meanwhile, Axios recently reported that customer service startup Front “is welcoming employees back to its mid-market headquarters in late June.”
75% of the company’s 450 employees are required to come to the office on Tuesdays and Thursdays, unless exempted. The remaining 25% “are either in the office full-time, completely remote, or mostly remote,” reports Axios.
Front’s chief people officer Ashley Alexander told Technology Flow that the nine-year-old company — originally founded in France — has had an office in San Francisco for about eight years.
Front reopened its US offices on a voluntary basis in March 2021. After surveying its team “extensively” to hear what they wanted in the new post-COVID work structure, Front decided it made the most sense to ask people to come into the workplace. In the same daysEven if not every day.
“We wanted to be intentional about this, because a few people in a big empty office can’t accomplish what our team is looking for. We want to make sure that on the days when employees come to the office, they feel the buzz, energy and warmth of their team around them,” she says. If they could choose their own days, we could have small groups every day of the week — and employees who don’t organize when to get together would never meet.”
However, she acknowledged that the Front is only two months into its new policy and is “closely monitoring the return to office process” to see how it can be adapted and adjusted.
How this tug of war plays out over time remains to be seen.