Businesses and residents have been fleeing California in droves in recent years. Los Angeles and San Francisco have become dystopian hellscapes as open-air drug use, vagrancy, homelessness, crime, high taxes, and gross governmental overreach have turned what was once the promised land for dreamers into a cautionary tale. As celebrities and industry pack up and head to greener pastures, otherwise known as red states, downtown districts in the two major cities continue to struggle.
The situation in Los Angeles has reached the breaking point, with the homelessness and crime affecting the business district. Factor in the insane regulations and high taxes, and it’s no wonder the business districts are bleeding residents.
For San Francisco, the outlook is even more dire. Once one of the crown jewels of America, the city by the bay is nothing more than a rotting husk of a once-great American city. For as bad as Los Angeles is, San Francisco appears to be worse. Crime is at an all-time high, and drug use and homelessness have resulted in a city that is literally covered in human feces. So much so that there are actual apps to track excrement on city streets.
The effect on the downtown area has been devastating. Many businesses have closed their doors due to crime. It is nearly impossible to stay profitable when smash-and-grab crimes happen almost daily, and city leadership turns a blind eye. The stores that remain have to resort to locking away anything that could be concealed and stolen and restricting access during non-peak hours. As businesses leave, they take their tax revenue, jobs, and employees with them. Recent numbers illustrate just how bad it is getting in San Francisco.
For the third quarter of 2023, the city’s office vacancy rates climbed to their highest level ever. According to Sfgate.com, office vacancies rose from 31.6% to 33.9%, which marks a record high for the city. However, numbers are expected to increase even further.
Some analysts see the trend reversing eventually. Colin Yasukochi, executive director of CBRE’s Tech Insights Center, said: “What’s starting to change is that the demand side is growing again, and that’s starting to offset these downsized. And ultimately over the next several quarters, that demand will probably outpace new supply and we’ll start to see the vacancy rate come down.”
The average asking price for rent is falling slightly as more properties sit unoccupied, and hopes are new industries will be enticed to move in. Reportedly nearly half of the new inquiries are coming from AI companies as they seek to gain a foothold in the tech district of the city. Naturally, if prices decline, new industries will seek to get a deal on rent, but will the decaying conditions downtown dissuade potential companies from moving to the city? Yasukochi concluded: “We have to start somewhere and this seems to be an inflection point where we’re starting to see things at least get a lot less bad and a little better at the same time.”
The business district may be poised to rebound, but for how long? How long will downtown businesses be willing to tolerate all of the unique challenges San Francisco offers? Things could change quickly if the state government would put the residents of California first and clean up the decaying cities. Sadly, it takes a visit from a Chinese Communist leader for Gavin Newsom to hose down the streets of San Francisco. If the state continues that path, industry may rebound temporarily, but eventually, they will skip town like so many before them.
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