High atop San Francisco’s beleaguered downtown this month, the owners and redevelopers of the Transamerica Pyramid celebrated the skyscraper’s 50th anniversary and impending rebirth as a beacon of hope for a struggling city.
Owners of office buildings stuffed with tenants during The City’s tech boom are now making the case that the COVID-19 pandemic accelerated a radical shift in the downtown real estate market — one that has caused their property values to plummet. A recent estimate by The City’s lead economist, Ted Egan, warns that this downturn could gut annual city tax revenues by as much as $200 million by 2028, hampering San Francisco’s ability to balance its budget and provide services to its residents.
In a PowerPoint presentation outlining her budget instructions, the mayor’s office offered a warning.The City levies taxes on property owners to pay for the services such as paving streets, mowing the grass in parks and funding homeless shelters. The amount a property owner pays is calculated by multiplying the tax rate and the City Assessor-Recorder’s assessment of the value of that property.
If an appeal is granted, it can amount to an annual savings of millions of dollars for property owners. But “nobody wants to be in that position” where the value drops precipitously, stressed John Bryant, CEO of the San Francisco Building Owners and Managers Association.“The tax break that you get isn’t so significant that it’s going to make a huge difference,” Bryant said.During the pandemic, many employees got comfortable working from home.
A recent report from the City Controller’s Office draws a direct connection between the persistence of remote work and declining value of commercial real estate. Even the most optimistic projection considered by the Controller’s Office analysis puts the office vacancy rate at 20% or higher into 2026.Without the steady revenue of well-paying tenants, building owners are arguing that their properties are worth less money and looking to the Assessment Appeals Board for relief.
And the tech industry, which has seen a surge in layoffs after rapid growth during the pandemic, has also sought relief. Uber is asking for a reduction in assessment on its properties — including flagship offices on Third Street and Market Street — be reduced by about $520 million from $835 million.
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