Revisiting my two-year SF predictions

Two years ago in the dark depths of early 2021 I wrote Predictions for San Francisco over two years, containing guesses for how the city’s extended Covid policies would impact its civic landscape. I said to revisit these in 2023, so here we go.

7 out of 9 by my count, which isn’t half-bad. But also one of these situations where I really hate to be right, since none of these are good things.

~Every customer-facing business (that’s not a grocery store) in the financial district and SOMA is gone. That’s bars and restaurants, boutiques, and even a lot of big chain retail who can no longer justify the expense (H&M, Uniqlo, and even The Gap have already permanently closed their flagship Union Square stores!).

This one is a good example of why I should’ve tried to come up with specific metrics to hold myself to because it’s complicated, and the result is subjective.

San Francisco is dead last in the country in return-to-office recovery, and it shows. The SOMA district that used to used to be the home of tech HQs is functionally a ghost town, and although most business that used to be there has failed, many long time ones like Sightglass, REI, or Cafe Suspiro continue to hold out. Union Square’s seen some resurgence as tourism made a comeback after mandates were loosened mid-2022, but the tide is still against SF. The signature locations along Powell and Market that used to house big stores like H&M, Forever 21, or The Gap still sit empty, and new departures like All Saints, Crate & Barrel, and most recently, CB2, continue. We still have our Apple Store THANK GOODNESS.

I think my prediction was right in spirit, but I said “~every” which was an overstatement, so I’m going to call this wrong based on phrasing.

Verdict: Wrong.

Rents continue to slide. SF cheerleaders called the bottom months ago, saying it’s a great time to get in at a good rate, but they’re wrong. With continued downward pressure on salaries thanks to remote work, and general municipal evacuation, landlords simply cannot command the old prices anymore. This doesn’t mean they ever get cheap, but the days of the $2500/mo studio are over.

Pre-lockdown, a studio in SF went for about $2,600. Prices bottomed out in May 2021 at $1,900, and have sinced crept up to about $2,100. This was very close to my expectation. Supply for residential units in SF is so (artificially) constrainted that they’re never going to get cheap, but the 2019 days when tech money was flowing from VCs to San Francisco landlords are gone until inflation brings them back up to the same numbers on a devalued currency.

The reason SF pundits thought they were getting a steal was that 2019 was going to be coming right back, and people returning would would drive prices back up. It didn’t happen. More on this in the next section.

Verdict: Correct

The age of tech comes to an unceremonious end. Many companies left during the last year, and many more will go. There are some left over, so it never goes to zero, but the city starts to equalize with better managed regions like Austin, Seattle, and Miami.

Tracking the San Francisco tech exodus is a little dated, but was a great resource. In short, almost everybody left including AirBnB, Brex, Credit Karma, Oracle, PayPal, Pinterest, Slack, Splunk, Stripe, and Yelp to name a few of the big ones. Not all of those companies are fully gone, but are either gone or have listed supermajorities of their office space for sublease until they can get rid of it.

San Francisco political leaders expected to be able to turn their business sector down then up again like the dial on a stereo, and that after 2+ years of functional lockdown, they could ease up on restrictions and everybody would come marching back. It’s been 6+ months now and not only did that not happen, but trends are still moving the other way. Real estate and rents are still expensive (landlords can hold vacant units cheaply thanks to Prop 13), and the network effects of San Francisco are gone, so companies continue to give up office space as leases expire. 2022 Q4 vacancy stats came in at their highest ever.

Saying “the age of tech comes to unceremonious end” was right on target.

Verdict: Correct

The budget imbalance isn’t just large (as already known), it’s catastrophic. Continued federal bailouts ameliorate this somewhat, but it’s so big as to be finally untenable. Breed avoids layoffs as long as possible (by further reducing public services instead), but is forced to eventually do so. Increasingly few services are provided as the budget becomes almost wholly salary and pension obligations.

The deficit is “only” $200M for 2023 thanks to huge slush funds from California and Biden. Projections are for the deficit to hit $528M for 2024, $746M for 2025, $992M for 2026, and to finally breach a billion by 2027 at $1.22B. Very likely these are far too optimistic as they all bake in assumptions that 2019 business will eventually come back, which all signs in the reality where most of us live point to not happening.

Breed hasn’t had to make much in the way of cuts so far thanks to bailout money. We’ll see what happens with that one over the coming years because unless she can secure more free money from Gavin or Joe, both of whom have their own financial problems right now, logic would dictate that something’s got to give.

Verdict: Correct

Public transit reductions (initially claimed to be a Covid safety measure) are permanent. Naturally, there is no proportional reduction in operating budget.

As of today, 20 lines are still suspended, and that doesn’t account for the reduction in frequency on many routes fleet-wide.

What Muni did here will serve as a template for all the city’s departments as the budget stops expanding – provide less service for the same amount of money. San Franciscans, being political animals who don’t care about any results just as long as their politicians have a (D) next to their name, will make little noise about it. See this article for example that loudly proclaims the glorious return of the J line and parrots SFMTA talking points about how Muni will be back in business by summer 2022, but naturally with no reflective follow up on how it didn’t happen.

Verdict: Correct

“Slow streets” are entirely reverted, or so dramatically reduced as to effectively be (e.g. the SFMTA’s post-Covid plans for Twin Peaks). They’re popular with the community and an excellent safety improvement, but the SFMTA bows to pressure from the car/fire [2] lobby, which finds them very inconvenient.

San Francisco made 16 slow streets permanent, but they’re a “car-free Market Street” situation – a title that means nothing and is for all intents and purposes ignored. The signs are in place, but serve largely as slalom markers as drivers careen around (or sometimes just through) them at high speeds. The one on Sanchez Street in Noe Valley seems to be a bit better than the others for reasons that I’m not entirely sure of.

The SFMTA executed their Twin Peaks plan, and turned it back into an Initial D race course with great views, and a parking lot at the top for smashing beer bottles on the ground and conveniently mugging visitors for photography equipment without having to walk too far. A small section on one side’s stayed closed to car traffic, but that’s worked out very well for city employees, who keep gate keys handy so that they can use it as a personal shortcut up the mountain. Driving up the other side instead takes an extra three minutes, and time is money.

The city surprised me when JFK’s partial closure was voted into permanency last November. The city’s fire and police departments, along with de Young museum employees, make sure to show their contempt for the decision by making regular drive throughs and to show the city’s pedestrians, runners, and kids on tricycles who’s really in charge.

I said “entirely reverted”, but caveated it with “or so dramatically reduced as to effectively be” so this one’s a pass.

Verdict: Correct

SF’s Covid-sanctioned tent cities are still around, having lasted so long as to be politically fraught to unwind, and been informally made semi-permanent. They may eventually be shut down on a case by case basis if the land under them gets to the point where it’s right on the eve of active development (e.g. McDonald’s Haight, eventually).

I was wrong, which I’m surprised about. These encampments were costing the city upwards of $60,000 per tent which mean that the projects were lining the pockets of many public workers, and I would’ve thought they’d become a self-sustaining industry that’d fight for its survival like the city’s other homeless services.

I guess the optics of a giant tent city a block from city hall and where literally the United Nations was ratified was a bit too much for even San Francisco leadership, who might’ve been afraid that returning tourists would snap pictures and send them to friends in the Evil States of Texas and Florida, who’d make fun of them.

Verdict: Wrong.

SF voters continue to pass more “let other people/the future pay for it” ballot proposition taxes/bond measures. (This barely belongs on here – it’s a slam dunk.)

Last November SF voters created two new taxes with surely more to come as it’s quite traditional.

That said, I’m a little surprised SF isn’t trying for something more ambitious like trying to go after remote workers in some way to tax them because although tech offices are gone, a lot of tech workers stayed in the city. However, the implosion of the city’s budget is still an ongoing event after it was delayed thanks to bailout money, and the real pain is still going to take a few more years to manifest, so I’m not ruling this out yet.

Verdict: Correct

The central subway, ten years after the project started, is still not open.

It finally opened, but was of course again delayed multiple times since I wrote that. In the end the SFMTA decided to launch it at the end of 2022 for weekend-only service so they had a fig leaf to say they’d technically hit their goal of “open in 2022”, but service didn’t really start until 2023.

It’s open, but the prediction I made was correct and it took more than ten years to open (construction started in 2012), was delayed multiple more times, and just entered service a few weeks ago.

Verdict: Correct

These were predictions that I was less sure about, but took a stab in the dark on.

Can restaurants/bars even in popular people districts like the Mission make it with just outdoor dining revenue? My guess is “no” if shutdown lasts another year, but it’s possible. The new outdoor system only works well in a handful of places where it’s actually nice to be (e.g. Valencia, Castro, Hayes Valley), which isn’t good for merchants not in those locations, but is having the effect of driving a lot of demand to those who are.

Commercial vacancy is higher than it’s ever been, and that’s also true in trendier spots. The Mission is still doing well, but see this collage of empty storefronts in the Castro for example. The trend has been the same for the last few years – things close one by one, and the overwhelming tendency is for nothing to reopen in their place.

It’s not clear how this trajectory can ever be reversed unless the city lets up on red tape, regulations, and taxes. Labor is continually more expensive, commercial rent is still high, and the cost of doing business is through the roof with high taxes and regular break-ins/vandalism.

Property prices stay high, probably. There’s downward pressure here as well, but Fed money games continue to deliver cheap debt and inflate assets to counteract it. But this could turn around if it gets bad enough.

Residential real estate is currently sitting at down -13.3% year of year, but that’s after an uptick in 2022, leaving it almost the same to 2019 levels, so this prediction was correct.

At the time I didn’t expect that the Fed would ever reverse course on ZIRP (Zero Interest-Rate Policy), but their hand was forced after loose cannon spending finally triggered inflation that went as high as 9% last year. High mortgage rates disproportionately affect the most expensive housing markets since people can afford less, so the lion’s share of the -13.3% change can be attributed to Fed policy.

Parklets and outdoor alcohol consumption may or may not stay. Things look good for them currently (Scott Wiener has sponsored SB314, which makes outdoor seating and alcohol service permanent), but they’ve taken away at least on the order of dozens (gasp!) of street parking spots, and one should never bet against San Francisco’s parking lobby.

They’ve mostly stayed open, which is nice. However, the city no longer closes streets like Valencia or Castro on popular evenings, so most of them aren’t particularly pleasant to use. Most of the city has rediscovered their preference for dining indoors, a trait that would’ve made you an Evil Republican to San Franciscans only a year ago.

Public schools are still not up and running at old world capacity, and their quality has dipped even further to the point where no self-respecting parent will send their kids to one if they have any means to avoid it (this was already largely true pre-Covid, but the inequality gap continues to grow).

Schools are reopened, but the district’s taken a heavy hit like all public schools in California. Enrollment dropped another 110k last year, on top of the 170k from the year before. Since removing merit-based admissions, the city’s best-ranked high school is down 28 spots in rankings since 2019.

Busy bars, large events (e.g. standing room concerts, full-occupancy sports), and nightclubs are still illegal. Even years later, there’s enough ambient virus concern for ultra left-leaning cities to not allow any of these to happen.

Thankfully, I was wrong on this one, although it’s only been about half a year since mandates were dropped, so although it feels like it’s pretty far in the rearview mirror, it hasn’t been that long. Many boutique stores in San Francisco continue to enforce their own bespoke mask mandates to drive home how much they hate Florida.

Did I make a mistake? Please consider sending a pull request.