A few months ago when the new normal predictions were all the rage and being tossed around by everyone from my personal friends to pundits, psychologists, CEOs and politicians, I threw the “bullshit flag.” Human nature is what it is I objected. As soon as the all clear sounds people will flock back to stadiums, crowd movie theaters, dance at clubs, get hammered at bars and work off the hangover the next morning at the gym. People will be back at their offices complaining about the drudgery of being cooped up in a cubicle after months of complaining about the drudgery of being cooped up in the house.
Even now college football and the NFL are flirting with the notion of limited attendance at some of their games. As it stands now it’s just talk but I wouldn’t be surprised to see fans allowed in, even if just on a limited basis. I have to admit that I’m somewhat surprised to see NASCAR holding firm on empty tracks (and it’s very strange to watch) but I’m expecting crowds at the ovals in the near future. Some movie theatres are opening to small crowds as if the crowds hadn’t been small during pre-COVID.
All of the above, along with other services and businesses have been subject to local regulations which have ranged from laissez faire to strict. I still hold that human nature is what it is and always has been and sooner or later things will return back to at least close to the old normal. Some places never left the old normal and some are quickly and unwisely back to the old normal with people flocking to beaches and parks sans masks and distancing, which makes them, in my opinion, a bunch of flocking idiots. And then there are the Trump rallies which are attracting just plain fucking idiots.
And so I’m feeling like sooner or later my “bullshit flag,” on the “new normal” will be vindicated. Except, in one particular area – offices. And that may turn out to be a big deal.
The local news reported that Pinterest has lost interest in a 490,000 square foot lease at a yet un-completed office project in San Francisco. They got out of the lease by paying a one time penalty of 89.5 million dollars. That’s a big number to swallow.
Pinterest will keep the lease on their current building, maintaining what it says is their commitment to the local economy. At the same time the Pinterest CFO explained, “As we analyze how our workplace will change in a post-COVID world, we are specifically rethinking where future employees could be based. A more distributed workforce will give us the opportunity to hire people from a wider range of backgrounds and experiences.” That sounds a lot like corporate speak for their commitment to the community is provisional because if people can work from home (wherever home is), in the long term it’s going to cost the company less gravy.
Pinterest isn’t the first tech company to go remote. Facebook, Apple, Twitter and Square are transitioning to remote, and indications are that more will follow suit.. My daughter’s employer (small fry compared to Twitter) will be 100% remote and that’s fine by me. I’ve now got a permanent dog sitter when (if) Cora and I are able to travel again.
At first blush, this might seem like a great thing. Yes there will be less traffic on the freeways and less downtown congestion. Parents who work from home won’t have to worry about childcare and all the related costs. Families will have more bonding time.
And with corporate saving all that lease money, surely they’ll spread that extra scratch around in salary increases. What could be better than living in the heartland and collecting a San Francisco salary. What a boon, right?
Not so fast. Corporations are less Santa Claus and more old man Potter from It’s a Wonderful Life. All that saved lease money? The shareholders and executives are the wolves who get first crack at the kill and the proletariat are the scavengers who get to fight over the bones and scraps. Reports are that corporations are basing salaries on the economics of the employees’ home area, even reducing salaries of those who relocate. So you don’t necessarily get that S.F. salary if your head is hitting the pillow in Des Moines. And if you’re considering setting up a sham address in San Francisco you might want to consider that tax evasion and fraud are not taken lightly by the minions of the law.
The stories of people who have relocated or are in the serious planning stages are becoming legion. I read the stories of some who have or are moving out. They’re moving to Portland, San Diego, Texas, Oregon, Nevada, Washington, St. Louis and even Los Angeles for god’s sake. A recent survey of 4400 tech workers found that two-thirds would be willing to bail out if they can work remotely.
And so what happens to the cities (and it isn’t just S.F.)? San Francisco has been raking in millions in real estate fees and taxes related to new building projects (just try to navigate through the downtown construction on any day but Sunday) and the cash from workers commuting in. The permanent shuttering of offices is just the first domino. The next is the downtown economy that thrives on the Monday through Friday office workforce; coffee joints, restaurants, retailers, service providers and even the street vendors. To bring that point home, many of these downtown/financial district businesses don’t even open on Saturday and Sunday.
After the first dominoes fall the next go in rapid succession. The tax base craters, leading to the cutting of city jobs. Public transit, already limping along during these COVID days will permanently lose ridership and either raise fares or cut service or, more likely, a combination of the two. With the loss in city revenue some of the first services to be affected will be parks, rec centers and libraries.
The other day Cora and I drove into The City and as we approached on the Bay Bridge I noticed all the new high rises, apartment and office buildings, some still under construction. I’ve had mixed emotions about the changing and ever rising S.F. skyline. I was attached to the older skyline that had fewer behemoths.
Over the years though I’ve gotten used to the San Francisco skyline. As I drive in, or look at The City from across the bay in Berkeley I find a certain appeal to The City’s soaring skyline. The City seems to be doing the highrise thing in a sometimes edgy yet appealing manner. As we approached the anchorage I was saddened to think about all the labor and resources that are going into buildings that may be facing an uncertain future.
To the south I glanced at Oracle Park where the Giants play and further south to the brand new Chase Center christened by the Warriors just a little less than a year ago and still barely used due to COVID. Those stadiums were built in their locations with a specific socioeconomic plan in mind. Businesses, services, restaurants, bars, upscale residences and the two sports teams would create a vibrant downtown culture. How will all of that turn out?
As I was putting the finishing touches on this piece I came upon an article that first appeared on LinkedIn, titled New York City is Dead Forever (link) a piece that makes a similar, yet very dire prediction about the Big Apple. It’s a long, very long, article but well worth reading.
Quoting from the article the author, James Altucher, writes,
“Summary: Businesses are remote, and they aren’t returning to the office. And it’s a death spiral: The longer offices remain empty, the longer they will remain empty.
In 2005, a hedge fund manager was visiting my office and said, “In Manhattan, you practically trip over opportunities in the street.”
Now the streets are empty.”
The article reads like a dirge. It ends,
“I love my life in NYC. I have friends all over. People I’ve known for decades. I could go out of my apartment and cross the street and there was my comedy club — and I can go up on stage and perform. I could go a few minutes by Uber and meet with anyone or go play ping-pong or go to a movie or go on a podcast — and people traveling through could come on my podcast.
I could go out at night to my favorite restaurants and then see my favorite performers perform. I could go to the park and play chess. I could take advantage of all this wonderful city has to offer.
Will cities like New York and San Francisco become ghost towns? Hardly, even if earlier in the COVID crisis coyotes were roaming S.F.’s city streets. The cities aren’t going to become dystopian scenes complete with packs of lean, hungry dogs scrounging for scraps of food among crumbling statues. The cities won’t be scenes of streets littered with the rusted hulks of cars and yes, Lady Liberty and the Golden Gate will still stand in their respective cities.
Is the vibrancy of The City endangered?
There is change however. Home sales in The City are lagging and prices, if not cratering, are dropping. A friend predicts that foreign investors will snap up properties but that would be counter to a recent trend of a drop in foreign property investment. While the big players like Pinterest are capturing the news with their cancelled lease, there has been, over the months, a less reported trend of a downturn in office space leases.
Are we seeing a large scale “techie flight,” an exodus of affluent financial and tech workers from San Francisco to other cities, counties and states? Or is this just a short phase that will soon plateau? After COVID will companies start to rethink the whole remote work thing and suddenly announce, “Everyone back in the pool?”
I don’t see the same future as James Altucher does. He sees no evolution, no adaptation. Even if this trend continues for the long, unforeseeable future it doesn’t necessarily have to portend a future of gloom and collapse (unless maybe you’re one of the creme de la creme who just bought a million dollar apartment in a downtown high rise).
Cities change. In the 1950’s and 1960’s white people migrated to the suburbs as the cities became more ethnically diverse, white flight it was called. Over the ensuing decades white people started moving back to the cities, foreign investors jacked up the cost of living and gentrification saw a collapse in diversity along with soaring real estate and rent costs that went far out of the reach of the middle class.
There might be a good side to this for San Francisco. Maybe this puts a halt to gentrification. And just what will become of that office space that’s now going begging? Does that get reimagined into housing space? Affordable housing space? Maybe a whole new economy, a less affluent, more equitable economy will take shape. Maybe a trimming of the upper crust will bring a return to The City’s good old days of vibrant, colorful diversity.
COVID may never go away but it will get reined in. The museums and sights and tourist traps will come back to life. The Golden Gate Bridge isn’t going anywhere. San Francisco will again become a destination city. The shops and restaurants and services will return, as will the hot dog vendors and street artists. Possibly all of it will have a different COVID forced look to it.
As we rode into The City I remarked to Cora, “Maybe The City will get affordable for us.”
She remained quiet, probably wondering if I have any idea of what it is I want. You see there’s a bit of a dichotomy going on with me and where I would like to live. On the one hand I would love to live in a little cabin by the Yellowstone River (or any river) in Montana. On the other hand, I would move back to San Francisco in a heartbeat. I love The City more than any I’ve ever visited.
It’s probably just one of the those dreams on a par with guessing all the lotto numbers but maybe just maybe I’ll get another shot at The City. Clearly given Cora’s hardline stance on rural life I have a better shot at living near the San Francisco waterfront than a Montana river front.
However it turns out I wish all the best for The City by the Bay.