San Francisco was great at lockdowns. What’s the plan for recovery?

Mayor Breed downplays the office vacancies hindering The City’s economic rebound

San Francisco’s approach to managing COVID-19 has been hailed as a national model. But the economic recovery of its downtown following those strict safety measures? Not so much.

Business owners in The City remain frustrated with the slow pace of economic recovery, citing empty office buildings, struggling restaurants and a stagnant hotel and convention business.

“We need to figure out a way to make people feel comfortable and want to come back to the Financial District in large numbers,” said Steve Sarver, owner of Ladle & Leaf, a soup and salad spot with locations scattered between SoMa and downtown.

Some business owners fear another brutal winter as local COVID cases tick up. And they are concerned with City Hall’s economic recovery plans, or lack thereof. For many city leaders, however, the path forward on San Francisco’s downtown business woes is still an open question.

“I can’t be concerned with why people do or don’t want to be here,” Mayor London Breed told The Examiner when asked about downtown offices that continue to sit empty. “All I can do is the best I can do, get this city cleaned up so people feel safe and change people’s hearts and minds in the process. My hope is that over time, that will happen.”

San Francisco was among eight Bay Area counties to introduce a shelter-in-place order at the start of the pandemic, perhaps one of the hardest times a San Francisco mayor had to face since the HIV epidemic. The move was later followed by mask mandates and vaccine requirements to dine indoors, as well as for all city employees.

By many health measures, the proactive approach has worked: San Francisco has had some of the lowest number of COVID deaths and hospitalizations compared to other major cities across the United States.

But now, Breed is caught between maintaining an aggressive COVID safety strategy and guiding The City to a place where people can live, work and visit San Francisco at ease. Even compared to other tech hubs like Austin, San Francisco has seen remote work take on a stronger hold, data from the Office of the Controller shows.

“The overall story of San Francisco recovering, but not as fast as other places, still holds,” said San Francisco Chief Economist Ted Egan. “Our office jobs are heavily concentrated in tech and it looks like a lot of tech workers are staying away from the office this year. The fact that we have more tech than other places will make our recovery slower.”

The loss of foot traffic and tourism has been devastating for many small business owners across San Francisco, but especially those in downtown such as Leo Go, owner of Kirimachi Ramen in the Embarcadero Center.

“Business is still pretty flat. We haven’t even recovered 50% of what we lost. Nobody is here in the Financial District,” said Go, who has had to consider closing his business because of the drop in sales. “We don’t have many DoorDash or pick-up orders either because of our location, too. That makes it hard.”

Other companies, such as Ladle & Leaf, are struggling just to reopen. Before the pandemic, Ladle & Leaf had 13 Bay Area locations. Five have reopened, and two were permanently closed during the pandemic. Sarver said his business is making less than 20% of pre-pandemic sales.

“The City’s COVID restrictions aren’t hurting us at all because we are all take-out, but our customers just aren’t there,” said Sarver. “As a business owner, it’s really frustrating. We invested a tremendous amount into building our restuaraunts with the expectations that we could operate them. Now our investment in San Francisco is really challenging.”

Back to business, or not?

At a recent neighborhood clean-up in the Tenderloin, one of The City’s hardest-hit communities during the pandemic, Breed downplayed challenges stemming from high office vacancy rates.

Mayor London Breed participates in a neighborhood clean up in the Tenderloin with volunteers from Nextdoor, a social media company that recently began having workers return to the office part time. (Sydney Johnson/The Examiner)

Mayor London Breed participates in a neighborhood clean up in the Tenderloin with volunteers from Nextdoor, a social media company that recently began having workers return to the office part time. (Sydney Johnson/The Examiner)

The trash pick-up event brought together Urban Alchemy, The City’s new street ambassador program, and about 50 employees from Nextdoor, a neighborhood-based social media company headquartered in Mid-Market that has brought employees back in-person part time.

“Nextdoor folks are returning to work and they are taking an opportunity to invest and clean up here,” Breed said. “It demonstrates that, hopefully, they will be part of the community and not just come here for work, then hide.”

But Egan and others say Nextdoor’s decision to return to the office is rare in San Francisco.

“Companies do have plans in place and are trying to bring the workforce back in 2022. It’s not going to be a full return by any stretch of the imagination,” said Jeff Bellisario, executive director of the Bay Area Council Economic Institute. “Jobs that were five days a week are now on average three days per week, with two days remote.”

The office vacancy rate, currently estimated at 20%, has continued to steadily rise since the start of the pandemic in spring 2020, according to an October report from the San Francisco Controller.

Even most public employees are coming back to work in-person on a part-time basis. City workers were required to return to work in person at least two days a week after the Nov. 1 deadline to get vaccinated, with some departments requiring more frequent attendance.

Adding to the problem is a growing a labor shortage due to a variety of factors, ranging from having fewer customers to worker displacement during the pandemic, Egan said.

Entering the endemic

As cases of COVID moderately climb up again in the Bay Area, the question of what comes next is all the more tricky.

“Everything is dependent on the trajectory of the virus. If you are in charge, you want people to be vaccinated and that’s the only way to really get people comfortable moving around again in big ways,” said Bellisario, adding that the Bay Area Council, a consortium of local large and medium-sized companies, has encouraged vaccine mandates among members’ workforces.

But some local health experts say San Francisco is ripe to set a new example: Moving past pandemic policies once a successful vaccination effort has been made.

“I think we can drop all of the indoor mask mandates now. San Francisco has a really high vaccination rate,” said Monica Gandhi, who leads the Division of HIV, Infectious Diseases and Global Medicine at UCSF. “The City is not showing optimism and confidence in the vaccines.”

Gandhi believes the emphasis on COVID also distracts from other pressing health emergencies The City is facing, including opioid overdoses which outpaced COVID-19 deaths by three to one in 2020. “It isn’t the job of public health to keep people away from each other anymore with this level of transmission,” she said.

Other infectious disease experts strongly disagree, arguing that pruning back safety measures could supercharge a COVID spike this winter.

“Now is not the time to be talking about eliminating layers of protection when cases are rising. We have seen this record play over and over again,” said John Swartzberg, clinical professor of public health at UC Berkeley. “We are just weeks away from Thanksgiving, and the time will not be good for San Francisco economically with a rising number of COVID cases that I think will be inevitable over the holidays.”

Getting vaccines and boosters to people who still need them will be essential to both public health and economic recovery, Swartzberg said. With 5- to 11-year-olds inoculated, more parents will be freed from quarantines that are required if students come into contact with the virus, and make returning to work a struggle.

San Francisco and eight other Bay Area counties set criteria in September to trigger changes to health mandates. That includes getting 80% of county residents fully vaccinated, a benchmark San Francisco reached prior to the recently expanded vaccine eligibility for children ages 5 to 11.

It’s unclear, however, if easing mask mandates would boost the areas where the economy is lagging. Even after relaxing mask mandates for office work, many businesses continue to allow employees to work from home. And San Franciscans continue to spend more time inside the home than the state average, according to the controller report.

Sarver, of Ladle & Leaf, said part of the issue hinges on messaging and culture.

“That’s what city leadership needs to do,” said Sarver. “It needs to be desirable for people to get into The City. Talk about how BART is clean and air circulation is good. Show evidence that it’s safe to ride again.”

Easing mandates could make San Francisco more attractive for conferences, events and tourism again, Gandhi said. The sold-out Outside Lands festival shows there’s an appetite for large gatherings.

San Francisco International Airport lost more passengers during the pandemic than 50 other major airports across the country, the San Francisco Chronicle reported. The drop has been a major blow to tax revenue in The City, where tourists make up more than half of overnight visitor spending.

Meanwhile, cities such as San Diego, Los Angeles, Denver and Las Vegas are outpacing San Francisco when it comes to airport travel, hotel revenue and office attendance.

“It’s important for The City to update its protocols. By doing that, you are inviting tourists and inviting people downtown. You create a more vibrant place,” said Gandhi.

A prescription for recovery

With even medical experts disagreeing on a public health strategy heading into winter, answers for The City’s pandemic rebound won’t be easy.

“It’s just an adjustment we have to get used to. It’s now a part of reality. We know what COVID feels like and we know what it feels like to have our city shut down. These preventative measures allow us to stay open and safe,” said Breed.

To make up for the slow rebound, The City has launched a handful of programs aimed at supporting small businesses, including a recently announced plan to waive initial first-year permits, licenses and registration fees for new small businesses.

It also pumped $42 million into a workforce development program aimed at providing job training and employment services for nearly 10,000 San Franciscans.

Despite many efforts, economic recovery in areas such as public transit and tourism remains lower than the national average, the controller report shows. With flu season and potential winter COVID surges ahead, The City’s next moves will dictate just how long recovery will take.

“A large chunk of our city’s sales tax is generated from tourists and commuters,” said Egan. “Until we see recovery in those things, the economy will feel depressed.”

sjohnson@sfexaminer.com

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