Vacant retail space in San Francisco is at an all-time high, and one mayoral candidate has a plan to reorganize the city’s central business district and surrounding areas.
Former interim mayor Mark Farrell, a Democrat, has proposed a 20-year vision to revitalize downtown San Francisco to help the city recover from hardships exacerbated by the pandemic. His plan includes a new park at Embarcadero Plaza and the construction of a mixed-use building that would provide more housing options.
He also proposed tax incentives for companies that relocate to the area or require employees to work four days a week, with the goal of incentivizing industries outside of tech.
“I’ve traveled around the world and the country for the last few years for work, and other downtowns and other cities are recovering from COVID,” Farrell said in an interview with CNBC. “Unfortunately, our city ranks last in economic recovery post-COVID. To me, that’s a disgrace and that needs to change.”
San Francisco’s commercial real estate vacancy rate hit a record high of 34.5% in the second quarter, up from 5% before the pandemic, according to a report released last week by Cushman & Wakefield. Manhattan’s vacancy rate was 23.6% in the same quarter. Farrell’s goal is to cut San Francisco’s vacancy rate in half by the end of his first term.
A key part of Farrell’s plan is to bring workers back to the city. Many of San Francisco’s biggest employers Salesforce, Uber and visahave adopted hybrid working arrangements, with staff coming into the office only three days a week, at most. On top of that, the tech industry has been hit by layoffs over the past two years, with thousands of employees taken off the payroll.
Under Farrell’s proposal, businesses that move downtown would get a gross sales tax break, as would businesses that require employees to come to the office four days a week. Such mandates have drawn backlash in some cities, including Philadelphia, where unionized city officials recently lost an effort to extend in-person work even further.
“The issue right now is when you come downtown, there’s not a lot of people there. It’s nothing like what it used to be,” Farrell said. The incentives are designed to “bring employees back to the office multiple days a week and create a vibrancy that really propels the future of downtown,” he said.
Public safety is a major concern in parts of downtown San Francisco, where drug use and homeless encampments are rampant. Farrell has called for increased police staffing, adding that safety and street conditions affect every neighborhood, not just the city’s downtown core.
Elon Musk announced Tuesday that X, formerly known as Twitter, will be moving its headquarters from San Francisco to Austin, Texas. X has already been looking to sublease most of its buildings in the city, and Musk posted to X on Tuesday saying he was “tired of dodging gangs of violent drug addicts just to get to and from my building.”
Conventions and tourism have also been slow to return to the city since the lockdown began in early 2020. Farrell said the park at Embarcadero Square will be part of a plan to bring back some of that activity. He wants to create a clean, open park outside the Ferry Building to attract workers, residents and tourists. He likened it to San Francisco’s landmark Mission Dolores Park.
Image commissioned by mayoral candidate Mark Farrell’s campaign to show plans for a new “world-class” park on the Embarcadero in the future.
Courtesy of Mayoral Candidate Farrell, commissioned by Gensler
On housing, Farrell’s plan includes “aggressive tax increment financing” and local incentives to spur residential development and convert commercial buildings into housing. Farrell also aims to raise height limits in areas like the Financial District, SoMA and Mission Bay, creating “tens of thousands” of new homes and residents, and spurring residential construction in places like Union Square, which recently lost major tenants like Macy’s and Nordstrom.
Farrell said the idea is similar to New York’s Hudson Yards, which opened before the pandemic. The project was criticized for its high cost but has since become a success story, with a lower office vacancy rate than other parts of Manhattan. Farrell said the proposal is expected to generate revenue for the city, but it needs an anchor project.
“Right now the problem is downtown,” Farrell said. “There’s no one working here. It’s a ghost town. And that translates into less sales tax revenue. Property tax revenue is way down because buildings are selling for 10 or 20 cents on the dollar. And at the end of the day, the resulting commercial property taxes are putting a big hole in the budget here in San Francisco.”
Farrell is just one of 13 candidates running for mayor in November, including current Mayor London Breed, philanthropist Daniel Lurie and City Council Speaker Aaron Peskin, according to the city’s government website.
—CNBC’s Ari Levy and Jordan Novett contributed to this report.
