How Can San Francisco Fill Up Empty Offices and Stores?
57:52 Share

Hi, I'm Bianca Taylor. I'm the host of KQED's daily news podcast, The Latest. Powered by our award-winning newsroom, The Latest keeps you in the know because it updates all day long. It's trusted local news in real time on your schedule. Look for The Latest from KQED wherever you get your podcasts and stay connected to all things Bay Area in 20 minutes or less.

From KQED.

From KQED in San Francisco, I'm Alexis Madrigal. We've talked about it before and we're going to talk about it again. The collapse of the commercial real estate market in San Francisco during the pandemic was unexpected and unprecedented.

We've now had years to try to understand what happened. And we have a more realistic estimate of how long it might be before foot traffic recovers in the downtown area. So what now? There's a new mayor, more data and different ideas kicking around. Will Daniel Lurie make a difference? When will we say downtown is so back? It's all coming up next after this news. Welcome to Forum. I'm Alexis Madrigal.

I love walking through San Francisco. Strolling, running errands, hustling to meet someone, window shopping, all of it's good with me. It's the only city on the West Coast where the walking ideal really exists. And it exists because of the density of people and uses in the urban environment.

Right now, though, it feels like San Francisco is having a donut-shaped recovery. Literally everything outside downtown feels great, from Fort Mason and North Beach down the Embarcadero over to the Chase Center, a whole bunch of different neighborhoods, too.

But a downtown is more than just a place for the suits to go up elevators. So much of the city's infrastructure is designed to funnel people there. So much of the budget is designed to rest on the taxes that result from downtown office work. A lot of urban Bay Area politics could be framed as downtown versus the neighborhoods. But that's always assumed that downtown was strong and the neighborhoods weak.

Now that the relationship has inverted, what happens? Joining us, we've got experts in commercial real estate and retail. We've got Robert Sammons, who's a senior research director at Cushman and Wakefield. Welcome. Thank you. We've got Laura Waxman, reporter with the San Francisco Chronicle. Thanks for joining us. Good morning. We've got Katie Buchanan, who's a principal design director and co-managing director of the San Francisco office for Gensler, a global architecture and design firm. Welcome, Katie. Thanks for having me.

So, Robert, let's get a little update on the market. Like, bring us up to speed. Like, where are we at? Let's just take vacancies first. Sure. So at the end of 2024, our vacancy rate did tick down a couple of about 20 basis points, which is some improvement. That's the first time we saw a decline in our vacancy rate since the pandemic began.

We had positive net absorption, so more space taken up than put back on the market in the fourth quarter. That's the first time it's happened since the pandemic began. We had the best year of new leasing activity in 2024 since the pandemic began. So a lot of positives there in that statement.

And also, what would you, the vacancy rate in absolute terms is like 34%. 34%. And where is that historically relative to the pre-pandemic days? You know, San Francisco was certainly a boom and bust market. So it's ebbed and flowed a lot. We had a great run from about 2013, 2014 up to 2019. And we got to a point where we had a vacancy rate of just 5%. Oh, man.

That was the lowest of any major market in the U.S. And that's not sustainable either. Generally, we think of the vacancy rate sweet spot of anywhere from 10 to 15 percent. You need you need that amount of space on the market at any given time for tenants to move about, for tenants to expand, that kind of thing. Yeah. So here's been my question, and I can't wait to ask it.

If this vacancy rate is so high, so far above historical norms, why aren't the prices for all this kind of commercial real estate just cratering? Like my 101 understanding of market supply and demand is that this should have driven prices down. Sure. They are. Yeah. And in some cases, they absolutely have. I think what you see, especially if you take the CBD, for instance. Central business district. Exactly. Exactly.

There are so many different types of office product. So we're kind of breaking down the office product in the CBD into four tranches at this point. First, you have Tier 1 quality space, which are the top 15 buildings in San Francisco, essentially.

Those vacancy rates are below 10% at this point in time. Asking rents are above $100 a square foot in those buildings. And once you get up into the top of those buildings, into the view space, they're even higher. Now, have TI allowances or tenant improvement allowances increased? Yes. Has free rent increased even in those buildings? Yes, to some extent. But we've had this flight to quality, and they've been increasing.

They've really driven the market downtown thus far. Now, you've got a second tier of buildings, which is still Class A, which has gotten some of the overflow. It's priced less. Again, you've got tenant improvement allowances. You've got more free rent. But you're also creating in a lot of these buildings these amenity spaces to drive tenants to those buildings and kind of compete with that tier one quality building.

Then what you've had happen over the past year and a half or so are a lot of smaller Class A-, Class B-plus buildings trading. Those buildings were not sustainable as they were owned previously, but they've got new ownership that can pump money into those buildings. They were purchased for less than half of what they went for pre-pandemic.

And so the landlord now, the new landlord can go in and put money into those buildings, charge much less rent, and drive tenants to those buildings.

And then the fourth tranche really are those commodity products that haven't traded. Landlords really can't do a whole lot with them right now. And those we have to see. We really have to see what happens to those. And what percentage of the buildings is that last year? That last year, I would say probably 15 to 20 percent of the stock downtown. Hmm.

Katie, I would assume, just given what we heard from Robert, that some of those building owners as well as tenants come to a place like Gensler and say, "What can we do here?" Are they doing that though? Because one question would be, why would we build out these spaces if people aren't going to come into the office? So there's kind of the cultural component is also tied into this. How have you been approaching that kind of business?

Well, I think there's a couple of different ways. I mean, we see building owners that have for the first time needed to put in these amenity spaces in the past. Yeah, they haven't had to do that because the vacancy rates were so low. San Francisco is a little bit more behind in that than we see in other markets. So we've had in the last year a number of them come on board. There's the Cove at 425 Market. There's the

going on over at Embarcadero Center. We see some other things happening in the city, which is really exciting because I think it then gives tenants that are out in the market more opportunities because the

vacancy rates in those top tier buildings are quite low and people, a lot of our clients want to go to those spaces, but they don't have, they want to go to them because of the view or because of where that location is. And so when you start to open up the market to additional buildings that have amenities that might sweeten the deal for them, those are things that we see tenants really interested in. And when you, the second part of your question about why would,

tenants want to do that if their employees aren't coming into the office. You know, I think that there's a kind of an underscore of energy to get people into the office and people still need their real estate. I think that there's, you've seen a lot of people go away from not having any presence, real estate presence. They want to have kind of this home for their employees because it's

it's a cultural kind of hallmark of who these companies are, and that's really important to a lot of our clients. And so there's a lot that we can do with creating a sense of place and home for these companies and through their real estate and through their office space.

Laura Waxman, reporter with San Francisco Chronicle. Let's talk about another piece of this, which is the whole retail side of things. How much of a recovery have we seen? And I also just want to remind people that before the pandemic, there were all kinds of stories about how retail was in a kind of sectoral spiral as the Internet was siphoning off kind of the good business in, you know, just people buying stuff out in the world.

Right. So I think everyone agrees that this trend has been longstanding and going on since before the pandemic with online shopping and people really, you know, taking a step back from from brick and mortar. And the pandemic, if anything, has just accelerated that. Right. And for all the reasons that we're going to talk about today. But I think, you know, there are less people downtown now.

Public transportation has been an issue. I think there are many reasons why people aren't frequenting Union Square, for example, which was our premier shopping district for years. And as you know, there's been some high-profile tenants that have left. Yeah, I mean, tell us about a few of those. Yeah, so I think the biggest news, you know, for me personally was Macy's. And I think that was kind of that shock factor when that happened. Even for the city, it was in the middle of a very contentious mayoral election, right? So that was huge.

And, yeah, they said this closing their flagship store in Union Square, which has been there for decades, is part of a larger effort to close underproductive stores across the country. They did also say that they are focusing on their luxury brands and they're opening smaller luxury stores across the country, new markets as well. So that kind of shows you where things are going, right? It's that demand for large format retail spaces has increased.

Disappeared in a way. And what do people expect might be able to replace that?

Are we going to subdivide those places? That is the million-dollar question, I think, right? Yeah. What do you guys think? I think, just from covering the issue, I know that the city has done a lot to really relax zoning, to encourage other uses in Union Square, on Powell Street, and downtown. I mean, from what I can tell, they've done the most, and it really hasn't helped much.

The subdividing thing that came up recently in an interview that I was doing, and I was told that that's already an option, right? You can do condo conversions of commercial spaces. I haven't seen any of that happen. I don't know what the reasons necessarily are for that, but, you know. Yeah, I think that... Katie, we can't go ahead. Yeah, thanks. Yeah.

The conversion part of that for residential is something that is top of mind. I mean, we see a lot of that happening with office to residential conversion, but I think it's something that's an interesting topic for some of those large retail spaces. But not just residential, I think getting more of a mixed use component into those is what could be really exciting. I mean, we did a conversion for what was formerly the Macy's Men's Store, and that was prior to the pandemic. And that because it was this like

giant stone behemoth that you couldn't see into at all. And so it's got this really light scale, beautiful facade that kind of invites you into the interior. And it's got Choromate on the roof. There's also some meetings facilities on the interior. And they had talked about getting like a sporting venue inside at some point. So I think that's an interesting example that happened prior to the pandemic. And so thinking, I think it's going to take really big optimistic decisions

thinking and not necessarily what other retail tenant can we get in there? That's not going to be the solution. Right. So basically a bold developer or someone has to take a first step and then others will kind of follow, right? That's kind of how it works. Yeah. We will return to that in just a bit. We're talking about what it might take to refill slash reuse slash transform the commercial spaces.

of downtown San Francisco. We're joined by Katie Buchanan, Principal Design Director and Co-Managing Director of the San Francisco office for Gensler, global architecture and design firm. Laura Waxman, a reporter with the San Francisco Chronicle and Robert Simms, who is Senior Research Director at Cushman and Wakefield. Of course, we want to hear from you as well. How often do you visit Union Square or the Financial District or SOMA? What's your experience been?

What do you think about San Francisco's downtown neighborhoods and what could be done to revitalize them? You can give us a call. The number is 866-733-6786. That's 866-733-6786. The email, you know it, it's forum at kqed.org. I'm Alexis Madrigal. Stay tuned for more right after the break.

Welcome back to Forum. I'm Alexis Madrigal. We're talking about downtown San Francisco, what it might take to refill or reuse or transform the commercial spaces downtown. Joined by Katie Buchanan from Gensler, Laura Waxman from the San Francisco Chronicle, and Robert Sammons from Cushman and Wakefield. We're, of course, also taking your calls on San Francisco's downtown neighborhoods and what you think might be done to revitalize them.

The phone number is 866-733-6786. The email is forum at kqed.org. And of course, we're on Blue Sky. We're on Instagram. You can go to kqedforum.com.

I want to talk a little bit about what we have some examples now of companies saying we want everyone to come back into the office five days a week. And of course, there's, you know, sort of press release for investors that they're doing that. There's, you know, maybe the signaling to their employees about what they're looking for. But Robert, are we seeing like, say, Salesforce? Yeah.

brought everyone back some time ago. We see the impact in downtown of those moves? I would say yes. It's not back to where it was pre-pandemic. There's no doubt about that. It's certainly much more of a hybrid format, though you do see some companies saying, no, it's going to be five days a week in the office. I hope certainly that translates here and other markets across the U.S. too. But I think Tuesday through Thursday,

Certainly, I work a block away from Salesforce's headquarters. You definitely can feel it on the street. There are many more people on the street. And Salesforce is one of those companies that didn't do the kitchens inside for everybody to gravitate to in their building. They wanted people out on the street. And you're seeing that because they're going to the restaurants Tuesday through Thursday. They're visiting the shops and things like that. So definitely, it's made an impact thus far. But we need more of that for sure. Right.

You know, I'm also, Laura, I've just been kind of, there's a component of the downtown sort of retail metabolism. Like, can one piece come back without all the other pieces? And like, how do we align them, right? I mean, no, there's not one factor that people can just go top down. Like everybody has to come in and all the retail has to be open, you know? Right. That's a great question. I think, you know,

My opinion is that, and I think people generally agree that this is a long game. And, you know, we have a new mayor in City Hall now. And we were just discussing earlier, everybody kind of expects things to happen overnight, right? And that's not how it works. I mean, even in the office market, although we're seeing improvements after five years of a decline, that's huge, right? But even that, the recovery to get kind of back to that healthy place that Robert was talking about,

describing will take years, you know, potentially. And so I think with retail, it's the same thing. I do think that there has been a concerted effort by the city, which started under Mayor London Breed, former Mayor London Breed, to turn downtown into kind of a neighborhood.

And that includes entertainment zones, that includes a focus on events, right? And there have been some really successful ones over the past year. And we see people wanting to be out. And when they're out, they go to shops, they find a place to eat. You know, it kind of stimulates that whole environment. So I think that is a push in the right direction.

But it's going to take some time for that to manifest. We don't think of downtown as the neighborhood to really hang out in, right? Yeah. Noel, one of our listeners writes, you know, I know in San Jose there are lots of vacancies during the holiday season. The animal shelter started a pet adoption pop up in the former FedEx Kinkos, which has been empty for years. Success helping out the overcrowded shelter. And Mayor Breed did push this kind of pop up policy.

movement in San Francisco. Do you think that was an effective way to activate those spaces? You know, some of our public radio colleagues, you know, have a space downtown now.

Do you think that worked? Yeah. If you're asking me, I mean, I think it's a great idea, right? And I think that there have been some businesses that were traditionally in other parts of the city that actually are now in downtown and are staying there. I'm thinking of a sewing factory that was independent, locally run. I'm thinking of Devil's Teeth Bakery. They're still there, right? And they kind of graduated from that program and are now in, I believe, actual leases with these landlords. So I think that's great. Is it at the scale that we need? Probably not. Yeah.

Katie, when you talk with your colleagues at Gensler from around the country, obviously San Francisco is kind of the, it's concentrating a lot of the problems that every city has kind of had in their downtowns. We did lose the most foot traffic. It's been slowest to come back. But are there lessons that you've learned from colleagues in other cities where they said, well, you know, our city has done X or Y and it helped downtown in this way?

Yeah, I think that we're seeing more movement quicker in certain markets, like especially in New York, if you think about the office to residential conversions, because they've had legislation in for years since the 90s because of some impacts that they had with with their business district to get like lower Manhattan to be more mixed use and have more residential. We.

We are starting to see some of those policy changes to make that happen. For instance, their former mayor Breed and the supervisors came back last year and changed the legislation and to relax planning and building codes for flexibility on conversion and then also took away the transfer tax for conversion. So it's steps like that that can make a difference to, like you were saying, Sarah, about getting the

more of a mixed use kind of solution downtown. So if you get more people here who are living here, then that makes the ability to just not have such a homogenous central business district that people are here for all hours of the day. You know, I was really big on the idea of those conversions. And we did a show on it and I got really pessimistic because we had a developer come on who was like,

Well, there's essentially no cost savings. Maybe you can do it a little bit faster. Is that actually true? Or is that just, you know, developer math is always very confusing to me, you know, but apparently penciling out is quite different from how I think of how money works. So is that actually, is that true? There's no cost savings to already having a built building?

It depends. I don't know that it's that simple. I mean, things like legislative hurdles cost money and they cost time. So when you start to relax some of those things, it makes it it pencils out a little bit more. You know, we did a study with Spur to look at.

30 buildings in San Francisco, and 40% of those were good candidates for conversion. And that means a lot of things. That's not necessarily just does the cost pan out. So I think it's a more nuanced story than to say it doesn't work cost-wise to make that happen. Laura? I think what this has shown us, though, is that everything kind of needs to be right for a project to move forward. The zoning or permitting is one very important piece.

But there are other pieces to that, too. And we have relaxed zoning and we haven't seen those projects move forward. So I think, you know, what's going on in the greater economy, what's going on with interest rates, what's going on with an investor sentiment about a place, right? All of those things are just as important. So it has to be like this perfect storm of things colliding for a project to move. Exactly. Yeah.

Now, I was just going to say the cost of money over the past few years has been out of control in a way. And it's been very difficult to make these projects pencil out. And there are only so many buildings that do work for conversion and conversion.

the Central Business District, unfortunately. And it's a lot different than, say, lower Manhattan, where we had a lot of conversion activity from the mid-90s forward, when a lot of incentives were given out to make that happen. We're going to have to see incentives either from the city or the state or the federal government even to make those types of projects work. And do

Do interest rates for commercial developers like pretty much track with like with residential mortgage markets or are they in their own space? Somewhat in their own space, but similar. They travel the same path more or less. So, yeah, it just depends on the situation. But certainly, you know, we did a project. Cushman and Whitefield did a project last year, a paper called Reimagining Cities.

And it took 15 cities around the country and looked at what needs to change in these walkable urban environments. And certainly San Francisco is a case where 87 percent of the inventory is office related. That just doesn't work anymore for any CBD, really. It needs to be much more mixed use. It needs to be more live work play.

So that residential activity needs to happen. Like what would the ideal number be if you were just cooking it up? Office still needs to be the primary focus, certainly, but there needs to be much more residential. There needs to be much more, quote unquote, play activity as well. So cultural facilities, sports facilities, all that kind of thing puts, you know, puts it all into perspective when you're creating the perfect central business district, if you will.

Hold on, let's go to the phones and then we'll come back to the panel real quick. Evan in San Francisco, go ahead.

To put it short, you've got to just let it die and let the course of history do what it's going to do. What every neighborhood in San Francisco and throughout the United States has in common, commercial or residential, the gentrified in the mid to late 20th century, is that at one point, things were dirt cheap. The last caller mentioned lower Manhattan.

In the East Village, before EEOPOP moved into a doorman building 30 years ago, adjacent to it were squatted buildings and the former, I think it was a school where the young lords met. Those conditions existed for all kinds of historical reasons, from the GI Bill, the growth of the suburbs. But

Downtown San Francisco has always been focused on being an ancillary business district to surrounding suburbs, and that model is dead, and it's not going to come back, and there shouldn't be any more public funds devoted to attempting to resurrect what has, you know, it's...

When it has been. Yeah. Yeah. It is. It's demise is self-evident. And like Alexis Madrigal started out at the beginning of the call saying the law of supply and demand, why aren't commercial rents not only there, but throughout the city with all these closed storefronts, why are they not dirt cheap? Because people keep thinking that we're going to come back to boom times. I go back to 30 years ago when I moved here, 35 years ago or whatever in the 80s.

And the place still, with 100,000 less people, had the feeling in different neighborhoods of a failed Rust Belt town. Industry south of market. You know, I would go in a building as a courier, and I would see that there were plans to expand south of market by the commercial interstate.

in disease and spur and build all these things. But at the time, you know, rent was dirt cheap, but it was dirt cheap because people didn't want to live here. Evan, I really, no, no, no. I really, I want to take your, I want to take your point to the panel. I think it's really well, well phrased. I mean, you know, Chicago, San Francisco had been a poor town and then it wasn't. We had all these warehouses. We had a bunch of dockside facilities that needed to be reused. The whole city kind of needed to change its, its economic geography and,

The question I think Evan's posing, which I think is really interesting, is like, do we actually have to let things get to a real bottom? Like, you know, not cushion it, but really let things bottom out and like build from the bottom. What do you think? Well, I think Evan should be on the panel. And I think, you know, Evan brought up some really great points. I have lots of thoughts right now. But, you know, number one, the issue about funding, public funding going into downtown to enliven what was, right? And what's...

what's kind of passing through right now. I think that is something to consider and look at, right? I mean, there was, I'm forgetting the money right now, the amount, but there were millions of dollars that went into downtown last year. We have other neighborhoods that are also struggling. We have arts organizations in other parts of town that also need support.

I think those things need to be considered. Right. And there's a huge I mean, the question for me, though, right, is like the budget is dependent on downtown creators. Then there's less money. Like it is. It's one of those times where like the flywheel seems like can kind of go in either direction. What do you think, Katie? Yeah, I think that there needs to be maybe a pivot on some of that investment. I mean, brings up a really good point, Katie.

There's been investment in the past, and you think about what was south of Market and turned into Yerba Buena. I mean, that was something that was a huge amount of investment. And so I think going back to what you were saying about having more mixed-use uses here and bringing in more of that play and kind of entertainment and culture is another investment that the city needs to start making. Absolutely. Absolutely.

Listener Lisa writes in to say, "I work in a mixed-use building that houses a prominent black LGBTQ-owned ballet studio, a therapeutic workout studio, a couple art studios, and a nonprofit.

Ballet studio ended its youth program, subsequently had to stop running their studio spaces for other dance teachers because no one wants to come to Marcus Street, much less bring their children. This is the main problem. People will still crowd into fun, lively, interesting spaces and spend money if they are safe, easily accessible, clean, and vibrant."

I mean, Laura, obviously every mayoral candidate, including the former mayor herself, ran on being able to do something about this. Do you see anything out of the Lurie administration that has been sort of a real change in direction or? You know, I think TPD and I don't I mean that in the most respectful way. Right. Because he was just inaugurated and we need to give him some time to ramp up.

But I think, you know, he's already kind of put forward some plans on addressing the fentanyl crisis and kind of we're talking about clean, not cleaning up, but, you know, addressing certain parts of town of downtown that have been neglected. And so I think we'll see. And that will also take time. That will take resources that will take potentially new shelter beds, which he seems to be in support of. So I think, you know, it's it's there are plans on the board. We'll see what happens.

Katie, here's an interesting one for our architect and design person. Kristen writes, if the city wants people to come back downtown, why are they charging for evening parking? Why would I pay to cross a bridge just to, again, pay to park? This feels short-sighted. Stephen writes, there's been a gradual anti-car policy that has damaged a visitor's and resident's desire to shop and work downtown. These policies have harmed the city. Why would any out-of-towner want to visit and shop in San Francisco if street parking is disappearing and commercial parking expensive?

Of course, you know, how do we balance having all this parking versus the kind of vibrancy of the streets? I mean, one reason people have tried to have a more balanced transportation strategy, right, is to give cities the feel of a multimodal, vibrant downtown city. How do you all see that kind of balance from the kind of necessarily theoretical applied urbanism perspective?

Well, I think you're right, Alexis, that having a balanced approach is better than just, you know,

trying to assume that everyone's going to be able to take a car into the city. It's just we have two bridges to get into the city. And so having driven here from Oakland this morning, it's a challenge at times. So, I mean, I hear what you're saying that there's maybe people have different ways that they want to come into the city. I think that we rely on that revenue that we get from charging people to get into the city. So that's a little bit more complicated if you just take that away. I think you're in some ways robbing Peter to pay Paul.

Perhaps tying our public transit funding to our parking funding was maybe... I don't know about that, but yeah. And it's true. And of course, we've done shows on this too. Like Muni's budget is also in trouble. And I guess, Robert, I would take it to here. I mean, are we still waiting for another shoe to drop? Are there going to be more lease renegotiations? Are there going to be... Have we hit the bottom? I mean, at the beginning of the show, I think you basically were saying...

Things are on the way back up. Things have stabilized. But are there these other factors that might send us back in the spiral?

So that's great news. We have six and a half million square feet of tenant demand right now in San Francisco. That's up by about a million square feet year over year. And it's more mixed use. Sorry. I mean, you assume that a lot of that is tech, and it is.

And AI specifically. And AI, certainly. That's been a big part of the piece over the past year. But what we've also seen, there are a lot more professional business services in the market, law firms, smaller companies, nonprofits moving back into the city because it is less expensive than it has been in over five, six, seven years. So definitely more mixed use as far as office tenant demand goes as well. That's interesting. Yeah.

We're talking about what it would take to refill or transform the commercial spaces of downtown San Francisco. We're going to get to a bunch of your calls after the break with your ideas about the city and what might be done. We're joined by Robert Sammons, who's senior research director at Cushman and Wakefield, Laura Waxman, reporter with the San Francisco Chronicle, and Katie Buchanan, principal design director and co-managing director of the San Francisco office for Gensler, a global company.

architecture and design firm. If you want to get in on the conversation, phone lines are full, but you might want to try the email that's forum at kqed.org. You can also find us on social media, blue sky, Instagram or KQED forum. Of course, there's the discord community where you can join the conversation as well. I'm Alexis Magical. Stay tuned for more right after the break.

Welcome back to Forum. I'm Alexis Madrig. We're talking about downtown San Francisco, problems and opportunities with the commercial space there. Joined by Katie Buchanan from Gensler, Laura Waxman from the San Francisco Chronicle, and Robert Salmon from Cushman and Wakefield. Let's bring in Michelle in Pilot Hill, California. Hi, can you hear me? Yeah, sure can. Go ahead. Okay.

So for those of us who are happily and productively working from home, the question that I have is why would we want to be forced to return back to an office where we are once again fighting traffic, commuting, paying a lot of money to either park our car or somehow get to the office? That doesn't seem to make a lot of sense. And who are we actually doing this for? Mm hmm.

Do you miss it at all, though? Are we going to get for carpool building owners? Yeah. No, no, no. I totally... Do you miss it at all, though? Do you miss, like, going into the... Like, not... Maybe not going into the office, but... No, I don't miss it one bit. I'm super productive at home. I work in a field that...

There's no reason for me to be in an office. I can see how maybe younger workers would benefit from probably a more hybrid schedule. And I don't mind like doing our monthly sales meetings or meeting at a restaurant, stuff like that. But having to, like I said,

fight traffic, which just is insane. Why bring everyone onto the freeway all at the same time to all go to the same place? Well, now that you put it like that, Michelle, no, I appreciate it. Also, I've never been to Pilot Hill. I just looked up where it is. That also seems like a very beautiful place out by Auburn, which also probably contributes to the sense of, hey, maybe I'd like to stay in this beautiful place as opposed to

you know, driving into downtown. So I really appreciate the sentiment. And I have to say, and I don't know, Katie, maybe this comes to you. One of my kind of working theories is that people know that not going into the office as a collective endeavor will have these sort of consequences for the city. But maybe working from home is really so awesome that it just doesn't matter to most people. Maybe like getting that time back was...

was just too nice, you know? So from your perspective, like, does that mean that companies essentially need to set up the right kind of hybrid environment or make it, I don't know, like what's the answer do you think? Well, I don't think there's a one size fits all solution to any of this, but, you know, there's a lot of people that feel the same way about it's not worth their commute. So what we want to do is make it worth people's commute and not all job functions are. I think there's, we've seen a lot of

Similar to kind of learning loss, you know, a lot of what people are doing with their careers requires almost an apprenticeship. And to learn from people, we see that not being able to have those impromptu kind of collisions with other people in the office or be able to ask questions to be mentored, that's a lot more difficult to do when people aren't trained.

together in their offices or in their workplaces. So I think there are a lot of benefits to making people's commute worth it. But, you know, it's not, again, a one size fits all solution. We see that there is reasons for people to come into the office because you are creating a culture and you're creating a heart for your organization. Yeah. Michelle, thanks so much for that call. Let's bring in Cameron in San Francisco.

Hey, how are you? Hey, good. Thanks for calling. Thanks, Robert, Sam, and Laura. Good to talk to you guys. I'm Cameron. I'm actually a commercial agent on the Bay Area retail lead for Avis & Young, and sort of we specialize in what's happening downtown and have been sort of through the thick and thin of the pandemic. And everybody's saying, you know, what's it going to take to bring people back? And I think, you know, there's been a sort of a

I don't know, an ongoing theory that stay alive for 25. And I'm just here to say, you know, in the first month or so of 25, we've seen quite a bit of activity all of a sudden. So I don't know if everybody just had their alarm clock set for January 1, but we're seeing pretty good activity downtown. And do you guys specialize in kind of retail stuff? Is that the main Avis and Young? So...

So Avis is the only one is we're a commercial real estate services firm. So we have, you know, every function we have office, multifamily capital markets. But my I am the Bay Area retail. Yeah. So I specialize in retail. Do you have like a metric that you're using to sort of track like where retail is, how it's happening? Yeah.

Yeah. I mean, we produce a quarterly retail report just like Robert does. And so we're seeing activity. And I will say up until sort of, I would say last year, it was almost impossible to drive traffic downtown. Retail downtown has been very challenged. There was a lot of percentage rent only deals being thrown around and executed on. We actually...

I've done a few deals downtown. And, you know, I think that the sort of perception of retail downtown and I think, you know, you know, some of the panelists are talking about amenity retail. Right. You know, how do you drive people downtown? How do you bring people back downtown? And used to be that retail was a profit center. You know, the ground floor spaces were revenue generating pieces of the portfolio. But now as retail.

you know, office towers have emptied out, you know, landlords are saying, how do we get people back in the office? What kind of amenities do we create? And so, you know, everyone's... Put a sweet green on the ground floor. Landlord's worth it. Yeah.

Yeah. So every landlord has built fitness centers and conference centers and bike rooms, and they have amenities and things like that. And now they're sort of amenitizing this retail for the ground floor as well. So they're driving and they're saying, hey, we'll pay to play. We'll do a percentage-run only deal and sort of the vacant to vibrant sort of model where, hey, we'll try to incent people to try out a concept and see if it turns –

you know, long-term. And so in some respect that's, that's worked and we've seen some tenants that have stuck around, but I think we're seeing a lot of activity all of a sudden as, as sort of the, the return to work, you know, some of the announcements by these larger office tenants is happening. So, you know, it's positive, but I think the ultimate, you know, I think the reality is there's going to be a pricing reset, right? So, you know,

So supply and demand, just like some of the other callers have said, is what's going to drive people to your buildings? It's amenities and the most value for your dollar. And we're seeing a lot of buildings now that are trading between $200 and $400 a foot. They were $800, $900 a foot before. So it's just a price you reset.

You know, it's just this is another bump that happens about every decade or so in the city that there's some sort of event, you know, whether it's the tech crash or the residential crash. So we put it on our calendar every 10 years to get ready for a recess. Yeah. Thanks so much, Cameron. Laura, do you want to respond? Yeah. So Cameron curates the ground floors and he's done a really great job. And I know, you know, he would definitely know a lot about this. But I think

One thing that I have learned through covering commercial real estate and retail and all of that is, I think one thing to remember before the pandemic

As Robert said earlier, things were kind of unsustainable in a different way, right? The vacancy was really low and deals were being made at price points that were unrealistic potentially or just the structures were very unique, very interesting. And that now is kind of showing, right? And I think, and you guys can definitely correct me if I'm wrong, but I feel like there is a little bit of a reluctance as well by building owners because they have debt service, they have loans that they negotiated pre-pandemic that they have to pay off.

And if they get a tenant in there who potentially is below market rate, you know, and they have this loan maturing next year, I mean, that's going to be an issue, right? So you have to remember that it's a whole ecosystem that kind of hinges on lenders as well. And what we're seeing now, and I'm talking more about office at the moment, you know, we're seeing office buildings some be

trade sell at very low price points, like a building that was worth, I don't know, you know, 70% less than... Than it would have been just a little while ago. And I think that is where we're going to see the change this year, you know, because those building owners, as our other panelists said, you know, they can now, they have a lower basis. They can now curate, invest in the property, do things differently, and, you know, honestly, reset rents. They can set lower rents if they want to. But I'll say, too, that

At least we have buildings trading now. You know, we had over a dozen buildings, office buildings in the Central Business District trade last year. And that's way up from the previous three years. So that's great. That helps reset the market. And that's absolutely what we need. If those buildings aren't trading, then there's no movement in the market. And that's a real issue. Yes, they're trading from anywhere from 50 to 80 percent below where they were pre-pandemic.

But they are trading and owners can now go back in there and lease that space for a lot less than it was pre-pandemic as well. Because it kind of clears away that kind of financial fiction that's built over the top of the building that's projecting cash flow that will never come. Absolutely. Yeah.

It's also funny. I feel like I'm the only one, but I want to work in an old grimy office building where like your neighbors are private investigators. You know, I feel like that seems fun. You can smoke in the newsroom. Yeah. Why does everyone want tier one office space when you could just go, you know, have a door with that weird frosted glass and your name written on it? You want to live in a 1940s film. Yeah, that's right. That's right. Yeah. Isn't that why we move here? That's why we can't generalize. Yeah.

Let's bring in Barry in San Francisco. Barry, go ahead. Hey, Alexis. Nice to get an opportunity to call in. I was downtown in San Francisco yesterday. I had a doctor's appointment and I decided to stay down and this

just wander around. And of course, you've all commented that it is totally... I mean, I noticed it's cleaner than it has been. But one of the things that really struck me, and it struck me for a few years, is that the decision to close Market Street seems like...

a totally bad decision because architecturally San Francisco's main thoroughfare and the architecture on it is part of what makes it interesting and dynamic and exciting. And Market Street seems like a ghost town. So it's sort of one of the fun things about going downtown is the energy and the dynamism and the movement of all different kinds of people in all different modes of transportation.

And so there's barely a car on Market Street because you can't drive down it. A taxi can and a delivery truck can, and that's it. And I think that it's a really, really bad decision because the main thoroughfare, you look down it and you see the ferry building and the clock tower, and you look up it and you see, ultimately, way, way up the Twin Peaks and the transmitter tower, it's cut off. And I feel like...

such a bad decision. It's such an interesting... Not allowed to be opened up again. And I ride bikes, but yesterday I was going to a public employment and I had to use my car for one reason. And it was, it was really struck me that when I got to Market Street, it's just dead. There's no energy, there's no dynamism. And it really needs, I mean...

We cannot demonize cars all the time. Let me take this to the panel real quick because I think it's such a solid and interesting point that we...

closed market with the idea that it would add vibrancy to the city, that it essentially that the that the other users of the street would not just make up for the, you know, the missing cars or the vibrancy that cars add or the feeling of city life, but that they'd like go beyond it. Did that work? I mean, it's a real and here's another question I'll put over the top of that, Katie. What

How would we know if it worked? And would there be a process in the city to say like, you know, maybe that didn't work? You know, would there? I don't know. I'm really curious.

To me, it seems like it didn't go far enough. There needs to be more that's done. Like you could imagine what this could be in the future. Or you need to look around the country or around the world and you see what's happening like at the Ramblas in Barcelona. You know, if you could create that on Market Street, because you've got these very wide sidewalks and if you could activate them, I think it

gives a lot more purpose to not have all of these cars going down the street because that's just a really busy thoroughfare that might, I think the reason why that was done was like you were saying, Alexis, to bring more people to the street, but you need to have more of a place that's created to activate that. Yeah. It seems like they kind of went for balance, but got confused. Exactly. It's not all the way there. Yeah. Yeah. It's an interesting question. I mean, Matthew in Berkeley with maybe a countervailing point. Go ahead, Matthew.

Hey, thanks, Alexis. I'm a big fan of the show and happy to have some time to be here. I think this is kind of getting right to the note of it. There was an earlier caller from outside of Auburn who talked about how she doesn't want to drive into the city anymore. And then you have this other caller in the city who does want to be able to drive downtown. And I think both of them are kind of missing the point, which is San Francisco's historic mistake.

of designing its downtown almost exclusively for car commuters. And now it's stuck after a very unusual event, which was the pandemic, with these millions of square feet of commercial space that people might not want to come back to, although I also agree it sounds like there's some good news on that front. But I think there's a little bit of a sort of a bipolar discussion here, which is what does downtown San Francisco want to be? Does it want to be a destination for car commuters?

Because by definition, that means it will never actually be a vibrant place. It will be a place filled with cars and parking lots where people go home at 5 o'clock, and it's dead afterward. And what we're seeing in cities around the world and even just around the United States that

that made that same mistake is that they're actually starting to correct it and they're investing in more residential uh uh buildings in their downtowns they're investing in more community amenities in their downtowns because part of what i think is happening and i want to go back to the caller from auburn that person probably lives in an east neighborhood where they want to hang out and i bet if she could work near there she would but the problem is that we've had this land use pattern in the bay area where it's like no you go you drive 30 45 minutes an hour hour and a half

And then you go home and then you go back and forth. That's not working anymore. There's this theory in planning called Marchetti's constant, which is about how far are people willing to drive or travel to get to work. We've reached the limits of that and we're not going to undo that.

Any other way, I think, than re-envisioning downtown entirely as a place for humans to live and thrive, as opposed to just a place for people to drive to, go to work, and then go home. Hey, Matthew, really appreciate it. Thanks for calling in, and thanks so much for listening to the show, too. Laura, did you want to take that one? Matthew just triggered something in me. Before the pandemic, there was a trend of companies opening satellite offices everywhere.

you know, in the East Bay and on the peninsula where their workers actually lived because this was such a big issue, right? With the commute and it was becoming unsustainable and people were on the road for two hours and housing costs are so high, they're living hours away, but they have to show up, right? And so that was the trend before the pandemic and that kind of disappeared because of the waning demand for office space. Yeah, yeah.

You know, one of the things that I was thinking too is, you know, we have the cars that are coming in, obviously, but then we have Bart and Caltrain. The traffic on the bridge from Oakland is terrible. And meanwhile, Bart is like,

Half empty still, literally half empty. And it really makes me, it has really made me wonder about what happened during the pandemic that maybe something got reset in what people were willing to endure in their cars. Because if you only got to come in two days a week, then maybe you're like, all right, I'll sit for an hour on the bridge. If you had to come in five days a week, you'd be like, I can't do it.

I can't do it. And so it really seems like we the for me, the other big foot to drop is like what happens if Caltrain and BART just can't hang on financially and we're not able to rescue them in some way, then we lose. I don't I don't even know what happens. That's disastrous. Yeah, totally disastrous. Right. Because, yeah, BART, even though downtown is a major destination, there's it connects the East Bay and San Francisco in this direction.

Very important way. Last comment from a listener on Discord says, I have family who feel just as caller Michelle does from Pilot Hill. No desire to do a commute. As an extrovert, I want to go and I have an office to go to. But because so few others go, there's little impetus, even though the commute by bike and BART in itself fun isn't of itself fun.

Eventually, the desire to work with others will drive me to find a new job that requires a hybrid schedule, and I look forward to contributing to the resurgence of our downtown.

So I think we solved it. Downtown's back. So back. We've been talking about what it would take to refill or transform or reuse the commercial spaces in downtown San Francisco. We've been joined by Katie Buchanan, principal design director and co-managing director of the San Francisco office for Gensler Global Architecture and Design Firm. Thank you so much for joining us, Katie. Thanks for having me.

We've also been joined by Robert Salmon, Senior Research Director at Cushman and Wakefield. Thank you so much for joining us, Robert. It's been great to be here. Thank you. And we have been joined by Laura Waxman, reporter with the San Francisco Chronicle. Thanks so much for joining us. So much fun. Thanks. Thanks so much to all of our callers and commenters. Really appreciated your contributions. I'm Alexis Madrigal. Stay tuned for another hour of Forum Ahead with Mina Kim.

Funds for the production of Forum are provided by the John S. and James L. Knight Foundation, the Generosity Foundation, and the Corporation for Public Broadcasting.