How remote work beyond the pandemic will impact the Bay Area
Salesforce was the latest Bay Area company to announce its workers could continue to work remotely after the pandemic. The growing trend is reimagining the typical workday and space, but how will it impact the greater Bay Area?
SAN FRANCISCO – Some Bay Area companies are rewriting the rules for how and where employees can work post-pandemic.
You’ve heard of working from home? San Francisco’s largest private employer, Salesforce, is now offering employees a “work from anywhere” option.
“An immersive workspace is no longer limited to a desk in our Towers; the 9-to-5 workday is dead; and the employee experience is about more than ping-pong tables and snacks,” Salesforce’s President Chief People Officer Brent Hyder said in a blog post.
Salesforce is the latest company to announce such changes. When Hewlett-Packard Enterprise announced it was moving its headquarters from San Jose to Austin,Texas, the company also said it would be offering a new flexible work options for employees.
“The impact could be on the office market but not on the overall economy ’cause I think most of the people will want to remain in the area,” said Stephen Levy, the Director of the Center for Continuing Study of the California Economy. “I don’t expect everybody to work remotely because there are difficulties. But the policy itself has positive. It opens up options to people.”
Salesforce is offering employees three options, ranging from fully remote to those who work more traditionally in the office for five days.
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The “flex” option is expected to be what most employees will work when safety allows, where employees are in the office between one and three days per week for meeting, presentations, and collaborations.
Salesforce says it’s also redesigning workspaces, saying the “hybrid workstyle” is in and the “sea of desks” is out.
A survey from the sf.citi.org found 63% of companies plans to downsize or has already done so, adding that commercial real estate firm Cushman Wakefield says there’s about 14 million square feet of vacant office space in San Francisco, which is equivalent to 10 Salesforce towers.
In the South Bay, the owner of Vito’s Trattoria restaurant near the San Jose airport says weekday corporate business is down 90%.
“Monday through Thursday lunch, we would average 74 customers per shift. Currently during these conditions, we’re averaging 13 people,” said owner George Nobile.
The restaurant sits in the shadow of the Qualcomm building.
“The work from home is really affecting the lunchtime business because people just aren’t here in the buildings to go out to lunch,” said Nobile.
The restaurant owner has laid off 75% of his staff but is vowing to rebuild, saying the only thing he looks forward to these days is being able to say he survived the whole pandemic.
SAN FRANCISCO (KPIX 5) — Tenants living in so-called affordable housing units are now in many cases paying more than their market-rate neighbors.
These affordable units are not tied to the traditional real estate market fluctuations and hopeful tenants like Christine McDow say they should be.
McDow is about to graduate from Middlebury College from the comfort of her childhood bedroom in North Carolina where she also just landed her first full-time job.
“I’m going to be working at a consulting non-profit and the financial district,” McDow said.
Her new role will bring her to San Francisco if she can find an apartment she can afford. McDow qualifies for affordable housing, but while searching the city’s website she realized some of the affordable housing units are more expensive than some market-rate units.
“I think the furnished one-bedroom was actually cheaper than the unfurnished one,” McDow said.
According to Apartment List rents in San Francisco are down 27% since the start of the pandemic. A one-bedroom used to average $3,500 a month; now it’s down to $1,983.
Below Market Rate (BMR) units haven’t seen rent drops; in fact, in Dave Osgood’s building, they’re seeing rent increases.
“The so-called below market and market-rate seem to be merging,” Osgood said.
There are 76 below-market-rate units at The Towers at Rincon Apartments, Osgood says all year he’s seen people move out as cheaper market-rate units become available.
“There may be as many as 20% of them empty,” Osgood said.
Studios on the city’s Dahlia website range from nearly $1,200 a month to more than $1,700 a month. One-bedrooms can go as high as $2,800 a month.
At the Avalon on King Street BMR tenants are locked into one bedroom leases at more than $2,700 a month, but now in that same building a market-rate unit of the same size rents for less. The city’s affordable housing portal is filled with units that are more expensive than similar market-rate units.
In a statement, the Mayor’s Office of Housing said: “The City has rent procedures in place that ensure affordable housing is in compliance with Planning Code and other regulations that keep below market rate rents between 10 and 20% below market. The DAHLIA system does not allow a building owner to solicit rents that are above market. Avalon at Mission Bay is an outlier… MOHCD will be contacting the building owner at Avalon, strongly encouraging them to use the DAHLIA affordable housing portal to fill their waitlist and lower their affordable rents to below their market rate units.”
“Places like San Francisco are becoming cheaper but they’re by no means affordable,” Rob Warnock a Research Associate for Apartment List said.
Warnock explains BMRs aren’t tied to the real estate market and therefore their prices aren’t as volatile, instead they’re tied to income levels set by HUD which haven’t dropped.
Warnock says if anything, more people qualify for affordable housing because of the pandemic.
“It’s putting a lot of downward pressure on the market that’s putting more attention on the cheaper units,” Warnock said.
Tenants say they want to see the city re-evaluate how it determines affordability.
“I think the city needs to recalculate what market rate is,” McDow said.
SAN FRANCISCO (KGO) — In the New Year, systemic racism has continued to force inequity in home ownership rates across the Bay Area, and Black families who are in a position to purchase a home often face discrimination.
It is no secret that home ownership is a proven pathway to building wealth in the United States. But in a competitive housing market with some of the most expensive homes in the country, it is tough for Black Bay Area residents to buy a home to start the process.
“It was work, but it was exciting,” said Paul Austin, a homeowner in Marin City.
He and his wife Tenisha Tate Austin feel like they captured a slice of the American dream when they purchased their first home together in 2016.
The couple secured an original Marin City pole home, but faced a number of challenges in obtaining the property.
“As soon as like a house came on the market, you go in, you put your bid in, and then you get outbid by like, $100,000 or more, rather quickly,” Austin said. “That can be a little bit depressing.”
The Austins bought the home off-market from another Black family, who were hoping to make homeownership a reality for a young black couple.
After moving in to their home, which was originally built in the 1960s, the Austins staged major renovations.
The couple added an entire floor and more than another 1,000 square feet of space.
They didn’t stop there, building a deck, new floors, a fireplace, and adding new appliances.
Then, the Austins got the home appraised.
“I read the appraisal, I looked at the number I was like, ‘This is unbelievable’,” said Tate Austin.
The family tells ABC7 that their appraiser was an older white woman.
The Austins are convinced race was a factor in her estimate.
The appraisal contains what the family believes was coded language, like “Marin City is a distinct area.”
The home appraised for $989,000, or just $100,000 more than what the Austins got it appraised for prior to their renovations, despite $400,000 in costs.
“It was a slap in the face,” said Austin.
The family immediately called their lender and pushed back. After a month of escalating their complaints, The Austins were approved for a second appraisal.
When the day came for inspection, they got creative with the process.
“We had a conversation with one of our white friends, and she said ‘No problem. I’ll be Tenisha. I’ll bring over some pictures of my family,’” Austin said. “She made our home look like it belonged to her.”
The home appraised for $1,482,000, or roughly $500,000 more than it appraised for just weeks prior.
The change was equal to a nearly 50% increase in value.
The Austins were outraged. They believe this is another ugly result of larger, systemic issues in the United States.
“There are implications to our ability to create generational wealth or passing things on if our houses appraise for 50% less than its value,” said Tate Austin.
“We know discrimination is in nearly every aspect of that home buying process,” said Jessica Lautz, National Association of Realtors vice president of demographics and behavioral insights. “We need to be addressing it as an industry.”
Discrimination in the housing market comes in many forms, and has a long history in our country and in the Bay Area.
The phenomenon has led to alarmingly low rates of Black Americans owning their own home.
Black home ownership lags across the country with only 44% of Black Americans owning their home in 2020, according to Redfin. Compare that to 74% for white Americans.
In California, just 34% of Black Californians own a home, according to the National Association of Realtors.
In the Bay Area, those numbers are even lower. Just 33% of Black San Francisco residents own a home, compared to 61% of white San Franciscans, according to Redfin.
The numbers are similar in San Jose with a Black home ownership rate of 31% and a white home ownership rate of 65%.
“There are still problems in the housing industry of Black people being steered away from white neighborhoods,” said Daryl Fairweather, chief economist at Redfin. “Even though that is technically illegal, or black people not having the same access to mortgages that white people have.”
According to the National Association of Realtors, Black applicants are rejected for mortgage loans at rates three times higher than that of white applicants.
Burdensome debt, as a result of the wealth gap perpetuated by systemic racism, is another factor that is suppressing Black home ownership.
“African Americans have nearly double the amount of student loan debt than we see for white homebuyers,” said Lautz, “That’s just one of the many hurdles that African American homebuyers are really strapped with and holds back their buying power.”
The Great Recession and now the COVID-19 pandemic have only made things worse.
Lautz stresses that closing the home ownership gap is essential to closing the wealth gap in our country. In order for this to become a reality, equity in housing and access to affordable homes must be the central focus.
“If we are aware that implicit bias exists in other systems, police, school, why wouldn’t they also exist in the housing market? And then what can we do to you know, fix that?” said Austin.
The Biden Administration has proposed a couple of plans that could increase home ownership in the Black community.
President Biden has proposed a tax credit of up to $15,000 to help first-time home buyers with down payments and a $100 billion fund to build and upgrade affordable housing for buyers and renters.
The San Francisco housing market has been through a lot in the past 12 months, from the initial blush of what might have been a “gangbusters year” to widely reported rumors of its imminent demise (hello, New York Times — we’re looking at you, once again).
The truth, as usual, is considerably more complicated than the obits suggest. For a boots-on-the-ground report, we spoke with Michael Bellings of the Bellings Brothers, a third-generation real estate agent (and San Franciscan) who, with his brother Aaron, did $92 million in sales in 2020.
Here’s why he thinks S.F. real estate is a perpetual buy, despite the occasional gloom.
InsideHook: Give us the elevator version of your assessment of the SF real estate market at this exact moment.
Michael Bellings: With everyone back from the holidays, the vaccine news and Biden coming in, there is an unbelievable amount of optimism. Tech companies are IPOing, with Airbnb, DoorDash, etc. Knock on wood, the tech layoffs are done. And interest rates are insanely low, so your money goes a long way right now.
I’ve been getting buyer calls off the hook. We’re not there yet, but it’s starting and you can feel it. I think we’ve seen the bottom, and now we’re turning the corner. If you have a well-priced single family home, it’s going to go immediately. No question. Everyone wants to buy a house in San Francisco and there aren’t that many of them. Condos went down last year for the first time in a decade, and [now] people are seeing opportunities: They’re like, “I can afford a two-bedroom now, maybe versus a one-bedroom.” I don’t think we’re going to have double-digit gains, like we’ve been used to over my whole career, but I think mid-level single-digit appreciation gains will definitely be seen.
What are the challenges for prospective buyers?
We’re starting to get a lot of demand back and there’s no supply — inventory is about 15 or 20 percent down versus what it was last year. Everyone’s fighting over the same, like, 10 properties. There’s nothing on the market.
So everyone’s fighting over the same thing.
Traditionally our supply in San Francisco starts hitting post-Super Bowl. A lot of husbands stop watching football on Sundays, and they’re ready to go back out to open houses. The sun is shining. Kids are back in school. So parents have more time. And no one’s traveling. I think we’re just a couple of weeks away from that. Everyone’s prepping properties right now — I’m prepping six properties coming on the market.
What do you think needs to happen before everything kicks off in earnest?
Two big things. Outdoor dining, so people can come back and hang out with their friends on the weekends on Chestnut Street and Union Street. I think that’s really going to bring the market back because then people are like, “Oh, Brass Tacks is open again — I want to buy in Hayes Valley.” So the first thing is San Francisco, and California, opening up. .
And then the second thing is people going back to work. Even if it’s three days a week, which is what I’m hearing, you can’t live in Tahoe if you’re going back to 10th and Market at Twitter three days a week. I’m hearing September or October for that. Word on the street is that tech companies aren’t going to let you work 100 percent remotely — or if they do, you’re going to make 70% of what you make. So why not come back to the city and make 100 percent?
How real was the exodus out of town?
There was a big exodus out of the city — really driven by the tech companies being closed down. People didn’t have to go to work — so rather than stay in a city where nothing was open, they left for the Wine Country or Tahoe — anywhere you could get outside and have some outdoor space.
But I would still say that was a red herring — [according to] every single news article that came out, every single person in the city was leaving. The people who left already had one foot out the door — maybe they were of in their early 30s, they probably had a baby, maybe a second on the way. And they said: “Am I ready to move to Marin now?” So sure — that accelerated their exit from the city. But it wasn’t like you had 28-year-old buyers working at Google who woke up and said, “I’m leaving the city. I’m done.”
And for every one person that was leaving, I’d get two or three more buyer calls, with people saying, “Hey, seems like there’s going to be an opportunity here.” They weren’t necessarily buying that day, but they were saying, “I’m still working at Twitter. I have a great job. I have great savings.” And then you had other people saying, “Hey, we’re going to IPO.” This can be a bit of an insulated area here, and if you didn’t lose your job, you had a lot of smart buyers wanting to buy.
What other changes did you see?
Wish lists changed immediately. Outdoor space became the number-one factor by far — maybe before it was number three, four or five, but it immediately became number one: They wanted a deck or they wanted a yard. So single-family homes shot up. Condos and kind of smaller buildings did okay. Based on my statistics, the single-family home market last year went up about 4 percent.
With the large, “hotel-like” buildings — specifically in SoMa, Downtown, what we call like District 9 — no one wanted to pay $1,200 a month for the HOA dues for a gym and a pool that weren’t open. No one wanted to share an elevator with six people, and no one wanted to be in a 300-unit building, and no one was walking to work.The beauty of SoMa is that you can walk a block to Twitter, and that wasn’t happening. For those buildings, it was a bad, perfect storm.
If I’m looking to invest in a neighborhood in S.F., where should I be looking?
I can make an argument for a lot of different neighborhoods. But I think you can kind of drop a pin in Mission Dolores and look out from there.
And where for better deals?
Outer Richmond, Outer Sunset, Merced, then District 10, being Portola, Excelsior, Bayview. The more you go on the outskirts of the city, the better deal you get. We’re the only city in the world where it gets cheaper to live closer to the beach.
Is there a bellwether for all this?
If you want to know how San Francisco real estate is doing, look at the tech stocks. Two years ago, I had a guy in escrow, and Apple stock went down 10 percent — it was like a huge deal, and my guy backed out of the house. Sure enough, a week later, the stock kicked up to record highs, but he had already lost the house.
Any changes in how the market works that you’ve noticed?
List price versus sales price. The last eight years I’ve been doing this, the strategy was always to price your house super-low. You get like 20 offers and it sells 20 to 30 percent above list price. Right now, we’re starting to see people price the properties closer to the expected sales price. If something’s priced at $1.3 million, it will probably sell within 5 percent of $1.3 million, rather than them pricing it at $999K and having a feeding frenzy.
What do you think about all the predictions that San Francisco is over — and everybody’s going to Austin?
I put zero stock in those predictions. My family has been selling real estate here for almost 40 years. My dad always taught me: Any time you can afford to buy a piece of real estate here, you do it. I joke with my clients — if you’re planning to leave, give me a call, because I’ll buy all that real estate. There’s only so much space in San Francisco — there will basically be no more single family homes built in San Francisco. My family has never regretted buying. We’ve only regretted selling too early.
