Can SF shoulder the latest office occupancy plunge?

Conventionally tech-reliant Bay Area cities like San Francisco should consider drastic budgetary cuts going forward, says CATO Institute’s Marc Joffe. With office vacancies soaring—most recently by tech layoffs and remote work trends—SF no longer can rely on early Internet development for the city’s fiscal stability.

Downtown San Francisco may be in for an extended period of reduced office occupancy resulting in lower revenue for local government. While it is tempting to view the current downturn as cyclical, there are reasons to believe any rebound will be long in coming….

[T]here are a couple of reasons to think that a similar rebound this time is not in the offing. First, in 2000, the internet was still at a nascent stage. Today, most people in the developed world have some form of high‐​speed internet access, and most people in the developing world can experience the internet on inexpensive older‐​generation smartphones. With so many people already connected and already engaging with online content for several hours each day, the room for further growth is limited, and thus the tech sector rebounding to a higher level is less likely.

Meanwhile, recent events at Twitter are raising a red flag for tech employment prospects. Under Elon Musk, the company has shed over half its workforce and is still serving a record number of users. If Twitter gets through the current turmoil without taking an extended outage, it will send a signal to other large tech companies that they are overstaffed. Management at these firms may respond with more layoffs, attrition, and hiring freezes. If management is not inclined to make these changes, it will face pressure from Wall Steet to do so….

These circumstances may force the city’s public sector to go on a diet.

This article originally appeared in the CATO Institute. Read the whole thing here.

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