San Francisco Mayor Breed says city faces remote work challenge as tech workers leave town or stay home

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  • San Francisco Mayor London Breed told CNBC that there hasn’t been an “exodus” from the city, but definitely a big change.
  • “Most employees want some level of work from home,” Breed said, in an interview airing Friday on “The News with Shepard Smith.”
  • San Francisco took a $400 million hit to its tax revenue in 2021, as businesses moved to other cities and shifted to remote work.

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San Francisco Mayor London Breed said her technology-heavy city will have to adjust to the new reality that many workers aren’t coming back to the office.

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In an interview airing Friday evening on CNBC’s “The News with Shepard Smith,” Breed acknowledged that tech workers have been slower to return to physical spaces in San Francisco than in other major cities.

“I wouldn’t call this an exodus. I would call it a change,” Breed said. “We’ve experienced a global pandemic. People have been working from home. And I think that most employees want some level of work from home as they returned to the office. And a lot of employers are providing that as an option.”

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The office vacancy rate in San Francisco rose to 24.2% in the second quarter from 23.8% in the prior period, according to CBRE research. Breed’s office estimates that one-third of San Francisco’s workforce is now remote and outside of the city. Last year, that resulted in a $400 million hit to tax revenue, according to San Francisco’s Office of the Controller.

“Of course I’m worried about the trend, but again, you know, this was a global pandemic where life has changed,” Breed said.

Some tech companies have moved out of California for states like Texas and Florida. Others have closed their offices in favor of a transition to remote work or downsized in preparation for a hybrid future. Salesforce, San Francisco’s largest private employer, said this week it’s cutting its San Francisco office space for the third time during the pandemic, and is now listing 40% of a 43-story building that’s across the street from the main Salesforce Tower.

However, not every major tech employer is cutting back. Breed, who said she works from her office five days a week, pointed to companies like Autodesk, Google and Twilio, which have expanded their office space in recent years.

“They have extended their spaces, but they’ve also committed to San Francisco as their headquarters,” Breed said, referring to some companies. “Certain companies are looking into other alternatives,” but what San Francisco offers, she said, is the highest concentration of venture capitalists “anywhere in the country.”

Breed said there’s been a recent uptick in downtown foot traffic, following an extended drought due to the Covid-19 shutdown. She highlighted the recent Golden State Warriors Championship paradewhich attracted an estimated 800,000-plus people in a city of about 875,000 residents.

Last month, Breed proposed a $14 annual billion budget for the 2022-23 fiscal year. Over one-third of that money has been set aside for public works, transportation and commerce, including the Municipal Transportation Agency.

For San Francisco to thrive, “I think it’s really going to be about making adjustments,” Breed said. “Our concerts, our activities, our conventions, a lot of the things that people would want to visit a major city for is what we have to also focus on, and working in the office is just going to be an adjustment to change.”

WATCH: Living the ‘pod life’ in San Francisco

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