San Francisco: Office space data says tech bubble is not popping
venturebeat.com
venturebeat.com
I hear a lot about SF prices, and housing, and employment/pay, and it all really seems to come down to this one fundamental question.
A lot of people want to live in SF, which is a very small geographic area. The simple law of supply and demand shows that prices will be high, and people that can pay those prices will stay, and people that aren't willing or can't will leave. This seems to be what is happening right now, economics in action.
In the end, there's likely a few possible outcomes: 1) We need people to do the "low jobs" that wouldn't pay enough to live in SF. Jobs like cleaning, food service, etc. All of these things still need to happen. So these people either need to get paid enough to live there, or there needs to be some kind of amazing commuting going on. This would continue the price rises.
2) People that can afford SF realize it's so expensive that it's not worth it. This helps deflate the prices, and increase economies elsewhere.
It honestly feels like we've got a bit of both going on. Many companies are getting out of SF because of the costs and moving elsewhere. But there's still too many people (and a lot of young people) trying to get in. We haven't hit equilibrium yet, so prices rise.
But the real question is, for people that can't afford to live in SF, and are constantly protesting that fact - do you have the right to live there, or should you just move somewhere else?
There are plenty of jobs in the US, and while there may be some real reasons that you NEED to live in SF (taking care of family is one that comes to top of mind), I can't honestly see any requirement to living there.
This is one of the reasons why I moved out of California entirely, after living in SF and LA, and moved to Nevada. But I'm not one of these people protesting that they can't afford to live where they choose, and thinking that's a right.
As far as I can tell, it's not a right. If you can't afford it, you can't have it. Not everyone can live in mid-town Manhattan or SF. Everyone does, so the people that make it are the people that can pay.
Things and times change. If you don't change with them, then you're the one standing in the road waiting to get run over.
But you're asking the wrong question, IMO. The right question is "do we have a moral obligation to make housing as accessible as it could be for the largest number of people?"
I think we do, at least to a point. Some places take it farther than others, but the general consensus is that SF's prices are a result of malleable policies and past decisions, not just hard facts of life (though the "water on 3 sides" thing is a hard fact for sure).
People aren't complaining that they're magically entitled to live wherever they happen to be standing. They're complaining that a system capable of helping more people live better is performing pretty poorly.
I think that's great that there's uproar. Personally I fear the day we stop demanding that the world around us get better.
I say the answer to that is yes. But if you make the question specific to a particular area, my answer would be no. Just about anywhere in the US is cheaper to house people than SF (other than NYC). It'd also probably be better for the economy to develop other urban and even suburban areas, because there would be more jobs related to people living in those areas (think cashiers, gas stations, places to eat, etc.)
While some places are hard to live, because there's no water, no medical services, etc, there's a lot of places to go live.
The big question now is about jobs. There's a lot of jobs in SF, and not a lot of jobs in small affordable towns, and people need jobs. But I think that's a self fulfilling cycle, in that tech jobs can really happen anywhere. You don't need a railroad, or factory, or have a port.
Overall I feel like people in SF are complaining that they can't afford to live in SF. Not where they are standing, or in a great neighborhood, but they want to live in SF. And most of them are blaming the tech companies completely.
I'm also not sure what system is helping or hurting people here. It seems to be simple economics. And while I'm all about helping people, knowing some of the ways people get around rent control in both SF and NYC, you're really fighting the clock to get things back to a normal equilibrium.
I'm all about people demanding things get better, but it just seems like people are angry that things suck, and while there are things that we can do (both people and government), nobody is budging.
This is ameliorated to some extent by the increased feasibility of telecommuting. If you can telecommute, then you can work from almost anywhere.
Unfortunately, there are still prices to pay for telecommuting, even if your workplace allows it. It's not for everyone. I have a friend who did it for a long time, and they got regularly passed over for promotions vs people who worked in the home office, but they got to live in a much more beautiful and much cheaper place than SF. Some people can't concentrate when they work from home. Some miss having coworkers they can socialize with in-person, and so on. But if you can swing working remotely, and don't mind the downsides, then it can be a much saner and more affordable way to go.
(Also, some people work better remotely, away from politics and open office nonsense)
I don't really know what I'm rambling about now, I just don't agree with the extreme of "make housing as accessible as it could be for the largest number of people." I'm happy to be priced out of places were I would love to live, and prefer that to the alternative of making them places I wouldn't want to live, I guess?
San Francisco has a land area of 47 square miles.
Manhattan has a land area of 23 square miles, with 4 times the population density per square mile of SF.
I've never been to a Bay Area, but NYC's subway system means you can live in a cheap area in Brooklyn or Queens and still have a reasonable commute to a Manhattan job.
Having lived in Manhattan, Brooklyn, and now SF, it really feels like it's not even a comparison. I certainly haven't been to all parts of the east bay, but from what I've seen there a couple of stops in downtown Oakland and Berkeley that have a significant amount of housing near the bart (but worth noting that some of these places have much higher crime rates than a lot of Brooklyn does today). Every further stop in every direction becomes very suburby, with a tiny amount of housing walkable to the bart stop, and the majority of commuters going by car to SF or at least driving to the bart station.
In that regard, it's not too much of a stretch to say that SF has no equivalent of the NYC subway service to Brooklyn and Queens. Bart to Oakland/berkeley is kind of the equivalent of the PATH train to Hoboken & Jersey City, and further areas more like the NJ Transit/LIRR commuter trains from the suburbs.
Given that it seems basically impossible to build significantly more rail lines in the bay area in the next 30+ years, it's such a waste that more effort isn't being spent building up more dense, downtown areas near all the existing bart and caltrain stops. Unfortunately all these areas have absolutely no accountability to SF or improving the bay area in general, and instead put all their effort into maintaining their sleepy suburb feel.
I've lived in both and Manhattan was considerably cheaper. YMMV.
Edit: Specifically, my rent for similarly-sized two bedroom apartments were $3,600 in Manhattan (Upper East Side) and $5,200 (Mission-Dolores).
Rather: The complicated zoning laws show that prices will be high. Otherwise one would simply build skyscrapers.
In short, people would stop building skyscrapers once they didn't make financial sense anymore for the developer, and that doesn't necessarily mean when it's affordable for a tenant.
That makes a lot of new housing, which is always good when there isn't enough.
The effects comes in later. People with enough money to afford the best new buildings refuse to live in the older ones. The price of the older places go down (or at least is put down by the new building).
Fast forward 30 years. The "old skyscrapers" are not the best place anymore, there are newer better places, they become more affordable, while the newest place is more expensive. (who knows what will be the expected standard of living in 30 years?)
That's long term planning. You need luxury skyscrapers now to control pricing later for the cheaper buildings.
Over time I agree, that economics will take over, as long as there aren't even more people wanting to move in, but that doesn't seem likely.
In SF/NY. There is so much immigration and lack of housing that prices won't go down any time soon, but the rise would at least be slowed down by new taller buildings.
A nice (but small) two bedroom apartment in a brand new skyscraper condo in Toronto costs ~CAD$2400/mo to rent. Not cheap, but less than half of what a (much) shittier place costs in SF.
Short answer: no. However I, and probably you, come from a place where we're able to obtain jobs fairly easily in other parts of the country. Mobility is something we expect and are actually privileged to. For those protesting, the idea of leaving San Francisco may be a completely outlandish thought for them.
I'm not saying one way is right, but I think there's a level of emphathy that needs to be used when we're talking about the concept of "home." Abstracting this into simple economics seems callous when we're talking about displacing people.
Also, the audience here might not be the best source to get an answer from a person/family being forced out.
This is also personal to me, in that I personally moved out of CA to NV because of the cost of living. If it was just as cheap to live in CA, I would live there, with my friends.
I get that this can be an emotional issue, but while economics may be callous, so is the harshness of reality. The same could be said for the cost of health care, and other rising costs that people are struggling to pay.
But denial doesn't help either. In the end, you end up racking up a lot of debt, then you move/declare bankruptcy/become homeless anyway.
In the end, I find facing the facts, and acting on them a much more reliable strategy for success. I feel too many people think they are "entitled" to these things, instead of taking reasonable actions to improve their situation.
And like you, I'll most likely move out of here because to put nearly a million dollars on a rotting woodframe TIC flat in an earthquake zone isn't the most financial prudent decision. But dammit, I do love this stinkin' city.
The people who earn 100k+ didn't win some sort of lottery... they choose to work in industries that pay well. They get up everyday and go to work like everyone else. Yes, some people are born into families with better support than others - but everyone has the opportunity to go to college and study STEM. Any student with decent grades and lack of capital qualifies for financial aid and scholarships.
As it stands, existing residents can't afford to buy out all potential high-density development, but are asserting their right to preserve low-density neighborhood character all the same.
It shouldn't be a right to live where you choose, but it is something society should optimize for. It shouldn't be a right to block urbanization either. If we took away the capability to block urbanization, a lot more people would get to live where they choose.
I fail to see the difference between visa requirements for foreigners that wish to live in the United States and a rent requirement to live in the Bay Area. Obviously San Francisco and the Bay Area are not sovereign so they can't require visas and border control but they have instituted a system that has the same effect. Notice that I assume government regulations are the sole cause of high housing costs in the Bay Area.
Another question worth asking would be how stringent do your housing regulations have to be to be considered a violation of other citizens' freedoms?
The Japanese asset bubble is also a classic, and some would say the Japanese economy is still recovering from that these days.
https://en.wikipedia.org/wiki/Japanese_asset_price_bubble https://en.wikipedia.org/wiki/Lost_Decade_(Japan)
(And before you can thinking about paying rents or whatever, if you are in the top tax bracket, enjoy paying 13.3% state income tax, which, after Federal tax, is a staggering 22% of your income.)
Paying around 50% here (plus another many percent paid directly by the employer).
Note that I'm in Europe.
I used this calculator: https://smartasset.com/taxes/california-tax-calculator#ysfEQ...
If I make more than 200k€ here. The higher bracket is 58.75% of taxes (+66k€ paid directly by the employer to the state).
Tax rates for the top income brackets in california aren't low either: ~40+%
If the tax rates were less, wouldn't employers just pay employees less? What's the point of calling out the high income tax rates?
The city is getting silly. I remember when 280 would never get traffic, now it's clogged up more often than not. And 85, don't even mention it.
I don't see what San Francisco's appeal is, except for the food. In almost every other respect, it's worse than any other major city in the United States, all things considered.
Coming from Canada (Waterloo region), where the winter is unbearably cold and the summers unbearably hot, I could get used to the cool and consistent climate.
As and outdoorsy person, I can't think of a better place than the valley area to live in and have such an abundance of things to do in nature. You're also pretty close to nevada and colorado, both of which are also beautiful.
As a technologist and entrepreneur, it's pretty obvious that the valley is the place to be, what with the greatest density of talent and tech/high-risk financing in the world.
You can't win.
Yeah, you definitely belong here....
For me, the only reasons to live in SF vs many other cities in the US are tech jobs and reasonable weather.
Yes, I agree, if you stay on the beaten path. Reason is, as I alluded to earlier, is that rents are so high that restauranteurs have to hedge their bets and do whatever is more likely to be successful.
If you open a restaurant in the Fidi or Soma, it'll probably be a trendy fusion place with an Asian twist (southeast asian, lemongrass, et al. seems to be a trend these days) that charges 12 bucks for appetizers.
Venturing out to the Richmond or Sunset, you get great Chinese food, but you have to know where to go. Going to Hunter's Point, you get a couple good soul food restaurants. Go to the Tenderloin, and you get good Vietnamese food.
Where did you go eat in the city, and who took you around?
- Like-minded people. Living in a region where people are genuinely interested in and passionate about the same things that you are is invaluable. There are a few people who live near me that are just as interested in science and technology as I am, but they are vastly outweighed by the people who aren't interested in it. Some of my friends in tech say they eventually get tired of hearing about tech all the time in SF, but as a twenty-something who just finished grad school, it will be a very long time before I get "sick of tech". Plus all of the VCs are in San Francisco, and failure (at starting your own company) doesn't have the same stigma there that it does in the rest of the world. SF always seems to be on the cutting edge.
- Beautiful environment. This is subjective, but I love the rolling hills, the bay, and the weather. I love how there are bike lanes all over the place, and how nature is just a couple hours drive away.
- The food. No city in the South can compete with the diversity of food in SF other than a few rare restaurants. (One could argue that I should just learn to cook better... which is a valid point.)
- The diversity. I like the mix of cultures and the exposure to things that are new. I'm one of those people who constantly craves novelty, and there's not many cities that can provide that.
New Orleans has an amazing food culture! You can walk into dive bars and have some amazing meals in that town, for like 5 bucks...
I was just talking about San Francisco. You can meet like minded people all up and down the peninsula, and in the East bay these days.
> Beautiful environment. This is subjective, but I love the rolling hills, the bay, and the weather. I love how there are bike lanes all over the place, and how nature is just a couple hours drive away.
Yet again, you don't get much of this in San Francisco. You could live in Marin County and get much better environment for a less expensive cost of living.
> The food.
I know I mentioned the food as a plus, but there's just one thing. Restaurants run on tiny margins these days, so if you're shelling out 10k a month for rent, a lot of restaurants start doing the same things. Sort of like how if you need a big budget for a movie, a studio would rather prefer you make a superhero movie sequel.
> The diversity. I like the mix of cultures and the exposure to things that are new.
There is little of that in the city, sadly enough. The novelty is fairly sanitized. It's like, sure, you go to burning man, but during the day you still work at the same kind of white collar job everybody else does
I think the only US city that fits that is NYC and even then you have to go look for it.
People in tech want to be in the Bay Area because the most intellectually, emotionally, and financially rewarding tech jobs are concentrated here.
Although some are also scattered around the country and the world, the job-hopping nature of our industry makes it a really bad idea to put down roots in a one-company town. Places (Seattle, Portland, Denver, etc) which begin to mirror the Bay Area in terms of tech employment opportunities start to look like it in terms of housing and traffic, too.
I'd wager that almost no SF tech worker choose it for the city first and job market second. Personally, I'd love to try being rural and remote, but I've yet to hear of a remote job that I'd be similarly interested in and passionate about, much less one that would pay comparably.
People tend to confuse San Francisco with the Bay area. Just remember, SF was not a tech hotspot until about 5-6 years ago, all the technology was concentrated in the south bay.
> much less one that would pay comparably.
Well, when you start paying 40k a year post-tax for rent, a lot more salaries start looking comparable.
The real issue is whether we will repeat the same mistakes of SF?
Also let's not forget venture beat is basing it's reporting on the seller side i.e. a real estate firm which has incentives to talk the market up.