San Francisco is on the verge of losing hundreds of millions of dollars a year to a corporate exodus driven by crime, homelessness and failure to recover from the covid pandemic, an analysis of official figures from DailyMail.com reveals.
Top retailers such as Nordstrom, H&M and Gap have pulled out of the city in recent months, and earlier this week the owner of two major hotels, including the largest in San Francisco, announced it would also be leaving the city.
Businesses blame concerns about staff and customer safety in the “deteriorating” downtown area, where drug use and crime are rife.
The situation is exacerbated by data showing that visitor numbers in the struggling center of the city are just 32 percent of pre-covid-19 levels. According to official forecasts, the public transport network is also on the verge of catastrophic failure as passenger numbers remain equally poor.
Leaders estimate the situation will contribute to a budget deficit of $1.3 billion over five years. The drop in property tax revenues alone could cost nearly $200 million a year, according to a worst-case scenario prepared by the city’s chief accountant.
An analysis of official numbers and other research shows San Francisco could lose hundreds of millions of dollars due to a corporate exodus and failure to recover from covid
San Francisco’s woes deepened earlier this week when the owner of the Hilton Union Square, the city’s largest hotel, and Parc 55 said it would pull out. It said the city’s path to recovery remains clouded and elongated by major challenges.
Many companies that have left have expressed concerns about the safety of staff and customers, including crime and public drug use. Pictured: Homeless drug users at an encampment in the Tenderloin neighborhood of downtown in February 2022
Park Hotels & Resorts announced Monday that it is defaulting on a $725 million loan for the Hilton San Francisco Union Square – the city’s largest hotel – and Parc 55. The hotels have a combined 2,945 rooms, accounting for nine percent of the total of the city.
A statement from Park chairman and CEO Thomas J. Baltimore said the city’s path to recovery remains clouded and prolonged by major challenges, including “record high office vacancy rates, concerns about street conditions [and] lower return to office than peer cities’.
The statement was a nod to the bleak homeless camps and overt drug use that is rife in some areas. DailyMail.com has repeatedly highlighted these grim hotspots and their devastating impact on communities.
Park’s decision was followed by news that 30 more hotels also have loans on their properties over the next two years.
That comes amid a retail crisis that worsened in May when Nordstrom announced the impending closures of its flagship store and Nordstrom Rack. In a statement, the company made a diplomatic reference to the “drastically” changed “dynamics” of downtown San Francisco, “affecting customer foot traffic…and our ability to operate successfully.”
Nordstrom said it will close its luxury department store and its Nordstrom Rack. The company made a diplomatic reference to the “drastically” changed “dynamics” of the downtown area. Westfield, where the store was located, blamed ‘unsafe conditions for customers, retailers and employees’
Several of the stores that have closed raised concerns about safety as downtown San Francisco is plagued by homelessness and drug abuse
Cameras have been set up all over the city and people are openly using drugs. Pictured: Homeless tents are seen in Tenderloin District during heavy rainfall in San Francisco on January 11, 2023
Westfield, which operates the mall where Nordstrom was located, was less delicate in its assessment. It blamed the “worsening situation in downtown San Francisco” and “unsafe conditions for customers, retailers and employees.”
H&M closed its flagship store in 2020 and the lease on its Westfield property expires in January.
A damning report published in May said 95 shops in the city center have closed since the start of the covid pandemic. Departing companies include coveted brands such as Lululemon, Ray Ban and Christian Louboutin.
Whole Foods also closed its flagship store on Trinity Place in April, just 12 months after its grand opening, announcing it would only reopen “if we feel we can ensure the safety of our team members.” The closure followed several incidents, including the death of a 30-year-old man in his toilet in September 2022 from a drug overdose.
With stores closed, downtown San Francisco’s visitor numbers have also not returned to pre-covid-19 levels.
Activity in downtown San Francisco is just 32 percent of pre-covid levels, according to research from the University of Toronto’s School of City, which analyzed mobile device activity. San Francisco finished at the bottom of a table of 63 US cities used in the study.
Passenger numbers on the Bay Area Rapid Transit, which serves San Francisco, Alameda and Contra Costa, are also at just 34 percent of pre-covid levels, according to official figures released in May.
Now that shopkeepers are fleeing and people are staying away, the vacancy rate of office buildings is also reaching unprecedented heights. The vacancy rate in May was 31 percent — representing 18.4 million square feet, or enough space for 92,000 employees, according to an analysis of data from Lee & Associates by the San Francisco Chronicle.
In April, Salesforce said it will vacate its eponymous 30-story downtown Salesforce East building, which employed about 1,000 employees before the pandemic
Tourism is steadily recovering to its pre-covid highs, according to figures from the San Francisco Travel Association
San Francisco is home to Silicon Valley and the job market is heavily focused on technology and services. Many employees in the sectors continue to work from home.
Many major tech companies based in San Francisco – including Meta, Google, Salesforce and Twitter – have also cut tens of thousands of jobs in recent months as the industry went through a post-covid crisis.
San Francisco Mayor London Breed has proposed a record budget despite the city facing a $1.3 billion deficit by 2028
In April, Salesforce said it will be moving out of its eponymous 30-story Salesforce East building downtown, which employed about 1,000 employees before the pandemic.
City officials launched a $6 million ad campaign in May to lure tourists back. Visitor numbers have improved since covid and in 2022 were about 16 percent lower than the record 26.2 million set in 2019.
The international campaign featured a commercial featuring an array of local talent, including Lady Camden, a drag queen who became popular in “RuPaul’s Drag Race,” and local muralist Sirron Norris.
Meanwhile, tax revenue for the city of San Francisco suffers.
The city’s revenue loss from reduced property taxes could reach $196 million a year by 2028, according to models released in November by the San Francisco Controller’s Office.
The modeling best-case scenario expects costs to be closer to $100 million per year.
That will contribute in part to a budget deficit of $1.3 billion by 2028, according to projections from the Controller’s Office. A report published in March cites “lower revenue projections” as a factor.
Despite the city’s worrying finances, San Francisco Mayor London Breed has proposed a record budget of $14.6 billion for the next two years.