The San Francisco Real Estate Crisis: Uncovering the Decline

Commercial Real Estate Investing From A-Z

What's the state of commercial real estate in San Francisco, California? I will be giving you my personal insights of what I have seen happen to the city and what I think has led the city to its current demise.

Read this entire episode here: https://tinyurl.com/mryyfc6b

1. A San Francisco office building that was worth $300 million pre-pandemic is now in contract for around $60 million. And that is between 200 to 225/sf. The building next door at 550 California St is reportedly in contracts for $130 a square foot. Lastly, a friend of mine put an offer in an office building about a month ago, her offer was $75 a square foot and although she did not get the building, she ended up going to the second round, which means that people are considering $75/sf offers. Let that sink in for a bit! Rent was getting close to $100/sf per year. And now you are able to buy an entire office building for between 1.5-2 years worth of rent pre-pandemic.

2. Uber announced that they will be leasing out their entire office building in San Francisco.

3. Google announced that they will be shedding 1.4 million square feet of office space in Silicon Valley. As we all know commercial loans are 3, 5 or 7 year fixed, a lot of them are coming up and they have to refinance at not only double the interest rates, but also they have to refinance when their office building is completely vacant - and nobody will give you financing for that. Operators are returning the keys to the bank, or they are having fire sales which is what happened with this 350 California Street building.

4. Nordstrom is closing both of its Stores in downtown San Francisco, citing the changing dynamics of the area that hasn't recovered since the pandemic and has been in the spotlight for crime.

5. AT&T just announced that they're closing its flagship store, citing declining customer visits, occupancy and sales.

6. Cinemark also just decided to permanently close the Century San Francisco Centre 9 and XD theater following a review of local business conditions.

7. Whole Foods in Downtown San Francisco Closing a Year After Opening due to safety issues.

8. Several Other Major Retailer closures since the pandemic: Saks Off Fifth, Anthropologie, Office Depot, Amazon Go, The Real Real, CB2, Banana Republic, Athleta, The Container Store, Crate and Barrel, Disney, Marshalls, H&M, The Gap. Imagine how many hundreds of 1,000s if not millions of square feet will be available for rent right now in the retail space alone in this city? But who would want to open anything when criminals can steal what they want, technically up to $950. There are homeless tents in many of these major streets. These people are on drugs, a lot of the times shooting themselves up with needles. Sometimes you're stepping on needles yourself, sometimes they're defecating or urinating right in front of you. Why and who would want to take up that space for rent and who would even be successful there to begin with?

9. Westfield Mall announces that they are returning the keys to the bank, they have been operating in the San Francisco center for over two decades. They are attributing this decision to the challenging operating conditions in downtown San Francisco, which have led to decline in sales, occupancy, and foot traffic.

10. Hilton Union Square (which is one of the largest hotels in the city, an entire block) along with Park 55 Hotel will be stopping payments on their loan.

11. Huntington Hotel and Yotel were recently sold in foreclosure auctions. This is not only because San Francisco took a very long time to get out of the COVID mentality, but also, because of the crime and all of the issues with the homeless and everything else.

12. People don't want to have conferences in San Francisco anymore. Hotels are struggling.

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