Breed Wants Public Workers to Move into Downtown Offices

San Francisco Mayor London Breed is not waiting for her proposed tax breaks to revive the city’s struggling downtown: the mayor has told key administrators she wants government workers to move into empty downtown office buildings.

Public office buildings that are emptied as a result of this migration will become sites for housing under Breed’s plan, according to a statement issued by her office.

In letters this month to San Francisco Unified School District Superintendent Matt Wayne; City College of San Francisco Chancellor John Al-Amin; and City Administrator Carmen Chu, Breed asked the three public entities to take the lead in a new program to move government employees into empty downtown offices, the San Francisco Business Times reported.

Breed asked each of them to conduct an analysis of their office portfolios and current space needs within the next 30 days, with the goal of moving a large portion of them downtown. Chu heads the city’s real estate division.

The entities have been directed to provide documentation of their office footprints, including leases, buildings owned by the agencies, and operating budgets. They’ve also been asked to provide information on how many workers and which departments occupy those spaces, “[noting] hybrid work patterns and public services spaces for each.”

The core of Breed’s plan involves making direct investments downtown, the mayor said in the letters.

“In the interests of fiscal responsibility and helping to lead the effort to revitalize our downtown, the city should take advantage of the current commercial office climate and do so in a way that directly invests in San Francisco’s recovery,” the mayor said.

“The city alone cannot fix all of the problems impacting downtown San Francisco; however, we can lead the path toward recovery as the largest employer in the city. By doing so, I hope the private sector will follow,” Breed said.

Breed’s office issued a statement indicating that by vacating publicly owned properties and moving government workers into privately owned downtown offices, the city will gain access to sites for new housing, the Times reported.

“San Francisco has a need for more land for housing, and the city and these agencies have land all over San Francisco,” the statement from the Mayor’s Office said.

A general shift to remote work triggered by the pandemic has resulted in an “overall reduced demand for office space and correspondingly lower rents for high quality buildings,” the statement continued. ”While this poses a challenge to the city’s finances and its overall economic recovery, it also presents a critical opportunity for city government to be strategic about its own use of office space.”

The San Francisco office market closed Q2 2023 with on overall vacancy rate of 31.6% and net absorption of negative 1.8M SF. The average asking rent for direct space is $73.59 FSG, with SoMa submarket rents at $53.94 FSG.

In a separate proposal, Breed suggested that the University of California regents consider establishing a campus in downtown San Francisco. Last month, the mayor suggested that the Westfield Centre shopping mall might be replaced by a shopping center.

At a Board of Supervisors meeting last week, Breed said she wasn’t just “throwing out an idea.”

“It’s about what’s possible,” the mayor said. “We aren’t saying that all of this is absolutely going to happen, but all of it can happen and that’s what we need to start thinking about.”

Last month, Unibail-Rodamco-Westfield (URW) disclosed it has stopped making payments on $558M in debt for the Westfield San Francisco Centre, the largest shopping mall in the city.

The company said the 1.2M SF mall at 865 Market Street near Union Square will transfer to receivership. The Westfield Centre, currently 55% occupied, is jointly owned by URW and Brookfield Properties, which acquired a stake through its acquisition of Forest City.

Deutsche Bank originated the loan for the mall in 2016. Midland Loan Services has been designated as the special servicer.