San Francisco Office Rents Pass Manhattan as Most Expensive in Country
bits.blogs.nytimes.com
bits.blogs.nytimes.com
One saving grace of the law is that in years when nobody wants to build, the city "banks" the excess for years when construction is over the limit. But we've just about exhausted those savings, and are now hitting the cap.
The developers and the owners of existing office space know that the carryover is about to run dry, and that the cap is going to be in full effect every year for many years to come, and are pricing their long-term leases accordingly. And companies, knowing the same thing, are signing them.
Did you hear that the Sierra Club is going to have to leave the San Francisco headquarters they've occupied since the 1800s, because the rent is now too high for them to afford? (http://www.sfexaminer.com/sierra-club-moving-headquarters-fr...) The irony is that those rising rents are due in no small part to their acting against their stated mission when it comes to allowing tall buildings in this city. They'd rather sprawl people out into the suburbs and beyond, where they'll bulldoze swaths of nature to build their buildings, and the people living and working there will have much larger carbon footprints.
Berkeley is especially guilty of this. Last I heard, a few years ago, the building cap was something ridiculously low. I was told six stories was the max by a friend as we carpooled to work from East Bay to South Bay due to the scarcity of attractive rental spaces in SB. Thus, there is major congestion toward and away from SF every day as the population cannot be condensed. Berkeley is the most NIMBY city I've seen.
It took me two years to find a high quality space to rent in an attractive part of Oakland and this was about eight years ago. Today, there's no chance I'd give it up as I'm doubtful I could ever get as lucky in the present market. I've concluded that if I opt to spend a year traveling, I'll have to pay rent on my present space while I'm not using it because I don't want to live in a delapidated unit at an even higher rate when I come home.
In SF, the vast majority of the city is zoned for a maximum of four stories, including the parcels surrounding most of its major transit hubs:
If we added those two extra stories, even just within 1/8th of a mile of transit hubs, it would yield enough housing to make a big dent in everyone's rent. We wouldn't even need any truly tall buildings.
If the city were to become unpleasantly dense it would be evident in people's actual, chosen aggregate preferences.
But raldi hasn't really touched on the situation, in my opinion: much of the city is not only limited by height, but by the number of units per building, usually to 2 or 3. It's not the end of the world to raise that to 8 or so.
More importantly, in SF, the vast majority of the city is zoned for 1 or 1–2 housing units per lot, with residences only (no mixed use), which means that in practice a huge part of the city is stuck at 1–2 stories. The lot shapes are these skinny awkward things that leave a little yard in the back, but many of those are basically unused dirt patches. Then add wide streets with huge amounts of street parking.
This is very anecdotal as I only looked once and who knows they could be more professional now, or their platforms more fully fleshed out. But back when I checked it out, it just sounded like any old person off the street talking about their beliefs. It's not a particularly good look in my opinion.
Aren't most politics based on emotional appeals it's the nature of the beast.
That's why I really appreciate Sander's constant peppering of statistics into every talk he gives. As an engineer, it speaks volumes to me.
https://www.reddit.com/r/SFBARF/comments/3n6rc0/sfbarf_needs...
... just in time for the inevitable and predictable downturn.
- Business (commercial real estate)
- Housing
- Transportation (streets, busses, trains, flying cars)
Does San Francisco have a good balance now? What if we doubled business and housing?
Where is the money going, and/or where should it be going?
What % of people who work in San Francisco also live there?
http://www.sfweekly.com/sanfrancisco/the-worst-run-big-city-...
As for people living vs. working in SF, this comment does an excellent job explaining it, with sources:
https://news.ycombinator.com/item?id=10875936
tl;dr: The increase in population due to daily workers commuting in from outside is vastly smaller than in NYC.
It's more of a testament to the city's anti-development attitude. Manhattan has twice the people with half the land area, on an island.
New York has sprawling suburbs that go into nearby states.
The SF equivalent of a lot of those areas are mountain ranges and oceans. To be sure, SF has suburbs (or suburb equivalents): SV, Oakland, etc. But a lot of prime area for suburbs can't support one.
Draw a 30 miles radius circle from manhattan and SF, and I bet NYC has more livable land.
That said, that is all the more reason for strong development in SF. Or else you are going to end up with SF just being a rich neighborhood for millionaires in a Bay Area megacity.
https://en.m.wikipedia.org/wiki/New_York_metropolitan_area
If you want to work in Manhattan, you need to live near mass transit (bus, train) because 30 miles in/out of the island is too painful. That greatly limits where you can live.
The issue is entirely politics not engineering.
As an example the Metropolitan Life North Building right next to Madison Square Park was originally designed in the 20s to beat the Empire State for height (but sadly, the Depression happened), and that plot of land is firmly on the "soft" ground "unsuitable" for tall skyscrapers.
Not only do we not need the bedrock now, it appears we never needed it - and the engineers of the early 20th century knew this as well as we do.
Also, I think, but, I'm not sure, that they built this extremely large, heavy structure right over the bay itself a few years back, something about helping cars get from Oakland to SF and back. I don't know how much bedrock they found underneath the supports for that thing, whatever it's called. Can't seem to remember its name ...
True, but that's because of comparatively recent developments in geotechnical engineering. They needed it during the first wave of skyscraper development.
Manhattan has twice the residents based on U.S. Census population data, but actual daytime population is more than just residents. A more important statistic is commuter-adjusted population [1], i.e. number of people in an area during normal business hours, including workers. That's where Manhattan and San Francisco really diverge.
The commuter-adjusted population of Manhattan is 3.1 M [2], compared to 1.6 M residents [3]. San Francisco has a commuter-adjusted population of 1.0 M [4, 5], compared to 0.8 M residents [5]. In other words, Manhattan's population booms almost 200% during normal business hours, while San Francisco's increases a modest 25%. Manhattan may have 2x more residents, but it has 3x more daytime population than San Francisco.
Given it has about half the land area, Manhattan's daytime population density is thus 6x that of San Francisco.
Attitudes on development -- namely transportation infrastructure and building construction -- certainly contribute to that difference.
1. http://www.census.gov/hhes/commuting/data/daytimepop.html
2. http://www.citylab.com/commute/2013/05/most-important-popula...
3. http://quickfacts.census.gov/qfd/states/36/36061.html
4. http://ww2.kqed.org/lowdown/2014/01/10/how-city-populations-...
5. http://factfinder.census.gov/faces/tableservices/jsf/pages/p...
No other place in the country has the kind of network effect that NYC does. It is entirely due to density and density is a direct result of NYC's subway system. As much as New Yorkers love to complain about the subway, and believe me it's a sport out here, we would not be able to accommodate the masses we accommodate without it. Transportation and, of course, vertical space is the way we do it. I really don't know why this is such a mystery to so many not from here. It's kind of glaringly obvious to the most casual of observers.
San Franciscans need to stop navel gazing and look up to the sky. Go up, my friends, go up.
Wait, so I could pay you to live in Dallas, but I couldn't pay you to live in SF ?
It doesn't need to be said here but I'll go ahead and say it anyway - Texas has no state income tax. Sure, they have no mass transit to speak of, but then again, in truth, they don't need it. (Outside of the philosophical view that all metropoli need mass transit, which I agree with.)
Edit: the fact that SF, a city with arguably a third the population of NYC has rents more than NYC is exactly the kind of "thing" that irks me about SF. It's the kind of social dysfunction that's intolerable - for me.
Another is the Bay Bridge. When standing in Marin north of the Golden Gate, there are a number of plaques describing the building of the GGB. A picturesque view with the BB in the background. Guess what? It turns out the GGB was built ahead of schedule and under budget - with no computers! I don't even need to go into the failings of the BB. You get my point.
I could describe how much more "social dysfunction" there is in Texas than California at length but I sense its going to be an uphill battle. Suffice it to say that my friends just got back from Austin where they witnessed a "mock shooting" at the university in support of the new open carry gun laws. When your legislators spend time expanding gun rights after repeated mass shootings, you're looking at social dysfunction. These same legislators also found the time to carefully craft anti-abortion legislation recently in an attempt to force all abortion clinics to close until the Supreme Court can overturn the decision. Meanwhile they don't seem to mind all the fake clinics being set up which use tax money and tax benefits to confuse and lie to desperate women who are under extreme stress already. You can have your 0% income tax rate "paradise" and try to remember that Texas has among the highest property tax rates in the country to make up for it.
Coming from NY, those property taxes don't really make me even flinch. When you combine lower cost of living, lower real estate and no income tax higher property tax doesn't even move the needle.
Texas pretty much defines sprawl in my mind. San Francisco could be more dense but it certainly isn't sprawling.
I don't particularly have a soft spot for either city, but I agree with you on the note of maturity. Manhattan has a far better idea of what it's doing compared to SF.
But if you take a less cynical view, doesn't this mean that SF represents a remarkable opportunity?
At some point the population has to get it together, elect better reps, reject the nimbyism and build more towers and trains.
It's actually happening as we speak. New bay bridge, extensions of muni, transbay tower, Salesforce tower, ...
I'm biased living in SF, just getting married, and avoiding the current market rate rents. but I see tremendous opportunities in SF.
Which is crazy to think given all the advantages - nature, water, work, weather - SF has over most other places.
>God just finished creating the world. He looks his creation and see France.
>"This country is to beautiful. It's unfair for the others countries."
>And so, God created the French.
On a side note, congratulations on getting married. Hope all goes well.
Manhattan is increasingly a financial services company town, and many parts of that industry are drifting to Jersey.
But maybe you could prove me wrong... I'm not sure, just noting what I see.
Those corporate HQs used to come with thousands of workers -- now more likely a couple floors of folks supporting the CEO. A lot of residential construction is funded by capital flight and shady political lobbying that helped get 2/3 top state leaders convicted of corruption charges.
Still a great city, but not the economic behemoth that it was.
...that is tightly connected to 10 times that land area as the boroughs of New York City. Everybody leaves that part out. It's more convenient to live in Queens and commute to Manhattan than it is to live in the Outer Richmond and commute to SOMA.
This matters, because the part of San Francisco that people conventionally see as "San Francisco" in has little overlap with the parts of the city that are actually low density. The city north of Market and east of Divisadero is fairly high-density development, by any standard: most buildings are at least six stories, and often taller than that. But to make the other 2/3rds of San Francisco viable as high-density development, you'd need to build a ton of new mass transit. It's car country over there.
There's immense hypocrisy on both sides of this discussion. I think height limits in SOMA and the Financial district and Mission Bay should be higher. But it's hard to stomach density criticisms from people who want to live in cute, victorian, single-family housing in Noe valley themselves, and re-develop the places where poor brown people live. And that's happening a lot around here.
Moreover, New York has been one of the world's largest cities for over a century. It's had a while to get good at things. San Francisco was a cow-town until the 1980s.
I realize it's self-satisfying to blame NIMBYs for everything, but the facts are more complicated.
[0] New York City is comprised of five boroughs (aka. counties): 1. Manhattan (officially known as New York County) 2. The Bronx (yes, "The Bronx." No one says "Bronx.") 3. Queens 4. Brooklyn (officially known as Kings County) 5. Staten Island
When I asked about the rapidly increasing cost of rent and how it's driving people out, he told me, paraphrasing,
"People don't have a right to live in San Francisco."
Another way of saying that you should only live there if you can afford it.
Needless to say, I'm inclined to believe that NIMBY's cannot be reasoned with.
Which is true, although the flip side is that people shouldn't have the right to prevent others from building new housing. At least not for reasons like "it might cause my property value to stop wildly increasing".
In short, at the extreme, the school teacher or SF state professor who was able to support a family and buy a 4 bedroom house in the sunset in 1975 wants the new professor in 2016 to be able to buy a a 4 bedroom house in SF and support a family, and is unhappy that this is no longer possible.
They also tend to believe, rightly or wrongly, that "density" would just mean lots of high end expensive apartments that nobody in the "middle class" can afford. In short (and again, I'm guessing), they are very cynical, perhaps irrationally so, about what development will do.
There are, of course, some pretty horrendous examples of redevelopment projects and so forth in SF. I know, you're already reaching for the keyboard to explain the difference, but you'd be preaching to the choir here. I'm just trying to explain why it's not really a desire to maximize the value of a real estate asset that drives so much of opposition to new housing and development. The whole thing has a very bad reputation in SF.
There is such a thing as YIMBY in San Francisco, often people who have seen their friends and children priced out.
That would be wrongly.
Supply and demand are real. The fact that SF is now more expensive that NYC proves it. Restrict supply long enough, and prices will go up.
People who refuse to believe in simple, verifiable facts deserve what they get, "sinister" or not.
Because of prop 13, property owners are largely insulated from the downside of a sudden spike in housing prices, and because their new neighbors pay far more in taxes, they get to enjoy a higher tax base without contributing to it.
Renters are more vulnerable. Rent control laws are strict in San Francisco, but people who lose their rent controlled apartment after decades are pretty much hosed. It's a risky gamble that works out for some, but not all. Many renters feel they never had the means to get into the housing market, not then, not now, so this gamble wasn't really a choice. This seems to have caused renters and tenants groups to double down on rent control rather than agitate for an increase in supply. Again, this is probably because they perceive new development as catering to the very wealthy.
The "needless to say" bit was on the presumption that SF should not try to imitate Dubai.
I think what these people mean is not that SF belongs to the rich, but that arrogant startup kids have no right to reshape a city that's been theirs for decades, just because said kids really, really want to live there.
I've been to many cities around the world that are practically defined by their lovely architecture, their comfortable streets, and their astounding views. Were I living in one of those cities during a tech boom, I would fight tooth and nail to prevent ugly highrises from taking over the skyline.
There's no ethical mandate to permanently keep growing.
(Caveat: I don't actually like SF all that much, but I totally understand where this mindset comes from.)
[1] https://www.zumper.com/blog/2016/01/zumper-national-rent-rep...
Aussies and Brits believe they are culturally different until there's an American in the room.
I'm not sure why you think this is worth pointing out, considering that Liberia, Myanmar, and the US are the only countries not using it.
I might be an extreme example, but most people use an imperial-metric melange of some kind.
I hope that wink means you're being sarcastic.[0] Yes, the majority of people are only in a single income tax bracket (20%). And the Pay As You Earn (PAYE) system means that most people who earn wages or salaries don't have to file their taxes. But only looking at income tax doesn't take into account the whole picture. "National Insurance" is effectively just an income tax but it's far more complicated than the income tax system (it doesn't get ring-fenced for pensions or health care or social services, it goes into the same coffers as income tax receipts).
But consumption tax is a VAT, which is notoriously expensive to collect. Then there are tax credits on dividends, and various business tax rules. Oh yeah and property tax is paid by the occupier of a house or apartment, not the owner (council tax)! And then there is the City of London that pretty much gets to write it's own rules.
The UK's tax system is better than some, but it's possible to do _much_ better.
0 - https://www.gov.uk/government/organisations/office-of-tax-si...
I really assure you that the simple implementation of PAYE in France would improve our national gross product by 10%. It is huge, it does mean that way more than 5% of employees, public servants, accountants and consultants are dedicated to write, understand, advise, control and ombudsmaning salary sheets.
Coming from Australia, I am accustomed to multiplying by 52 instead of 12.
So there are stories about people renting office space to live in. They'd also have a gym membership to use the shower and they'd save a ton of money.
I would seriously considering doing this.
I recall reading from somewhere, probably on HN, that a lot of banks open up storefronts primarily as a means of shifting money around into different instruments, not because they actually need or want people to do business at that banking location.
So, at $72/ft, your 10-person startup needs to spend $144,000 annually just for office space in SF.
Other comments suggest being based in a different location around the country instead – those will have both cheaper labor costs and cheaper office space. Will the ratio ever go below 5% though?
Did I get lucky? My wife's hotel stipend was 280 a night, which suggests, I probably did.
(I'm sure there are cheaper options especially once you get well away from the tourist, downtown, and convention center areas. Though I imagine that's true of Manhattan as well. But SF has gotten quite expensive in general.)
http://www.nytimes.com/2015/11/29/realestate/our-year-of-liv...
If you're just making cookie-cutter intranets or shopping carts or something sure, go 100% remote, but that is not what Silicon Valley is for.
Studies are mixed on the pros/cons of office vs remote. For example a Stanford study showed productivity increased 9 to 13% for remote office workers. Some have shown that collaboration can increase as well as communication was more intentional (I don't remember the study offhand).
Anyways, point is it's not all or nothing and the data is still out on effectiveness and efficiency (I'd think it also depends on the nature of the work etc)
Others on the team function differently
Compare:
1. A role which requires very little communication with the rest of team and quite a lot of long, uninterrupted concentration.
E.g. a developer working a long time on some internally intricate sub-system which has well-defined interfaces to the rest of the system.
2. E.g. a UX designer (or perhaps a product manager) who needs to talk to many people, whose projects shift quickly, whose work affects many other people's work, etc.
This is far better than simply talking to many people 1 to 1. It creates a written history indicating why each design element was chosen. It allows stakeholders to understand the requirements behind a particularly strange UX choice and allows them to give suggestions for better UX in a way that takes those requirements into account. Iteration can be faster as comments can be taken from all sides at the same time instead of having to seek people out and set up meetings.
I only see positives for a UX designer given the nature of their work is highly visual, functional and is cross-organizational. In fact, I think any company NOT doing UX design this way is probably being inefficient?
Sad but true.
Maybe that's not what Silicon Valley is for, in some grand cosmic sense, but I'd require some convincing that it isn't what Silicon Valley actually mostly does.
Our new management came in with "no more remote!", but then trying to keep up with what SV is "for" has been a giant hassle and destroyed ability to deliver.
- Politics / Face Time. Some people really do think that nothing goes on when people are working from home. Some people like to have everyone's attention now and again, to demonstrate something about their status.
- They haven't figured out how to do it yet, both technically and socially. If you have one or two people who don't know how GitHub works, or how Trello or Slack work, you can't do it. There are certain people who come from an age where you never needed productivity tools, and they just can't use them, no matter how easy it is. Unfortunately, they tend to be the people who can decide whether remote is working out for the team.
- They haven't figured it out socially: some people have configured their home life in a way that doesn't work for remote. The associations between being in the home and being away from home are deeply ingrained in some folks.
As for actual productivity, I've found it skyrockets in a properly functioning remote team. We have a Slack/Trello/Github/etc mashup where Slack is the hub. Anything that comes up can be pinged to the right person, and you can see when people are pushing code. The cards let you organise things. No commute + set your own hours means you get things done.
Not being tied to a location is great, too, though I do try to make sure the family gets enough attention.
Technically/Socially - An issue for all offices. I don't see my TFS to git migration going as well virtually. In person groups worked well. It's works well for a lot of things and often.
Productivity - Chat/SCM/etc are the hub regardless of physical location. In person we have access to white boards and pairing stations.
Commute - Every cyclist and public transit commuter gets a workout and decompression time. I still set my own hours with a core hour preference and accepting meetings that fit in my schedule.
Don't assume it's a technical and social issue. There's a spectrum of personalities and needs. I tried working from home with all the tools and a competent team socially. It was one of the worst positions in my life and had nothing to do with the work. I prefer my home away from home.
I've also interacted quite a bit with the Spring team, either in the office or through Slack. They are a fully distributed team, some of whom choose to work in various Pivotal offices because of the amenities.
Both approaches work, they just work differently. The cats-and-dogs arguments people have about local/remote is, in my experience, largely about personal preference.
Both because people may slack of when unsupervised, and because you want a team dynamic where you can have a quick 10 minute meeting about stuff, and so on.
Maybe Oculus Rift will be the beginning the end of astronomical SF real estate prices.
Some of it is also cultural. If you're not going to have drop by conversations and other serendipitous meetings, you need to be more disciplined about having those conversations anyway even if they wouldn't have historically risen to the level of sending an email or making a call.
It's really hard to turn an office culture into a remote culture.
I experienced this at my last employer (Heroku). We hired a ton of great remote staff, but there was always an impedance mismatch. Lots of local people still want to solve problems face to face.
It's much easier to start remote from scratch.
I am doing this with my new venture (Convox).
There are challenges. The high bandwidth face to face time is indeed better for problem solving. And is truly important for serendipity. But we are willfully trading those things in to work from home, live all around the country, and not spend money on an office.
Even YC is behind the curve here. They make you move to Mountain View and tell you distributed startups don't work.