San Francisco Is Cleaning Up Its Act

San Francisco seems to have escaped the so-called ‘doom loop’ it got trapped in after the pandemic; its real estate housing market has finally started rebounding; crime rates are down; and jobs in the Bay Area are surging, despite mass layoffs from tech giants in the region.

The pandemic hit San Francisco harder than other cities in the U.S., causing an exodus of workers freed by the obligation of having to go into the office and looking for more-affordable housing markets. At the same time, rampant homelessness, a drug crisis in the heart of the city—the Tenderloin—and a surge in crime, which led to the closure of several businesses downtown, contributed to the apparent downfall of the ‘City by the Bay’ last year.

Months after alarm bells rang for the city, San Francisco is making a surprising comeback.

“Many trends we discussed over the past few years are stabilizing,” Lu Chen, San Francisco resident and senior economist at Moody’s Analytics, told Newsweek. “Population turned from losses to net gains over the past two years, with both domestic in-migration and international immigration up in 2023. Last year was the first-time domestic migration turning positive since 2012,” she added.

This surge in immigration has “enduring benefits” to the city’s rental market, according to Chen, as new immigrants often enter the rental market, while new residents bring the energy back to the city, she said.

“Downtown foot traffic beyond 8 a.m. to 6 p.m. Monday to Friday or during the weekends has recovered to over 90 percent of its pre-pandemic level,” Chen added.

After 12 consecutive months of year-over-year drops between July 2022 and July 2023, house prices in the city have started climbing back. As of June, the median sale price of a home in San Francisco was $1,427,500, up 1.2 percent compared to a year earlier, according to Redfin.

Following above-average job losses last year, the Bay Area reported a job boom in May and June, according to data from the U.S. Bureau of Labor Statistics. Between January and June, the nine-county region added 7,400 jobs, most of which in the South Bay and the East Bay.

At the same time, San Francisco is still struggling with mass layoffs in the tech sector, where a good percentage of its workers are employed. Over the first six months of the year, the San Francisco-Mateo region lost 3,500 jobs. A Moody’s Analytics analysis said that the city’s job growth turned marginally positive in the second quarter of 2024, though overall employment was still 0.6 percent lower than the same time last year and 3.5 percent behind its pre-pandemic level.

Empty office space in the city’s downtown remains an issue, as working from home (WFH) hasn’t completely gone away after the end of the pandemic—but it is on a downward trend.

“Nearly a quarter of the city’s workforce are employed in the high-tech sector, which features the highest WFH rate,” Chen said. “However, as tech layoffs intensified since last year and FINRA [Financial Industry Regulatory Authority] is moving back to its pre-pandemic requirements for financial institutions, growing number of tech and finance firms including Salesforce, Meta, JPMC and the like are requiring employees to come back to the office on a hybrid basis,” she added.

The rate of people working from home around the Bay Area dropped from over 40 percent in 2020 to 30 percent in July, “lower than the average of top 10 metros that Stanford’s WFH research data was tracking,” Chen said.

The city’s retail sector—which was deeply affected by the sudden disappearance of commuting workers and travelers during the pandemic—is also trying to bounce back from several shop closures, which left its downtown hollowed out.

“Recent support from the San Francisco Office of Small Business helped the formerly known San Francisco Centre, which is now called Emporium Centre San Francisco, to land seven new tenants, including retailers and community organizations in the second quarter,” Chen said. “The city also invested in police patrolling and encampment sweeping to tackle commonly blamed safety and homeless issues.”

While the city continues to struggle with a deadly drug overdose epidemic, Mayor London Breed has been cracking down on open-air drug dealing in the city. Though homelessness is still a massive problem in San Francisco and all of California, Breed is implementing tougher measures to clear out encampments in the city, offering free bus tickets for homeless people to reach friends and families elsewhere. This approach is largely in line with that of California Governor Gavin Newsom, who ordered state agencies to clear encampments on state land.

Property crime was down 32 percent in the first quarter of the year, compared to the same period in 2023, while violent crimes were down 14 percent, according to official data.

Despite progress in several areas, San Francisco’s recovery has some limits. “Leisure and business travel still lag the pre-pandemic level, which are likely taking much longer than expected to recover,” Chen said.

Many office buildings in the city center are still empty, though Breed has launched a program—called Vacant to Vibrant—offering a free-rent period to businesses willing to occupy vacant storefronts in the city’s downtown. Despite efforts to tackle the fentanyl epidemic, more than 400 people died of unintentional drug overdose in the city between January and July, according to data from city’s authorities.

However, there are reasons for optimism. “The rising AI [artificial intelligence] empire is giving the city a new edge,” Chen added. “Funding, talents, and culture related to the AI revolution will help the city turn the corner,” she said. “It might cause some short-term pain as traditional technology firms readapt, but the city’s proximity to a deep talent pool will continue to support the endeavor and the broader commercial real estate market.”