San Francisco sees spike in incoming workers

San Francisco is beginning to attract more workers after the pandemic-era exodus.

• But the city's chief economist warns that an economic slowdown this year could affect the city's overall recovery, which has already struggled due to high office vacancies.

Why it matters: The rise in office vacancies means there are fewer people spending money downtown, San Francisco chief economist Ted Egan told Axios.

• That has significant implications for property and business tax revenues, as well as transit operations, he noted.
• San Francisco is projecting a $728.3 million budget deficit from July through June 2025 due largely to those declining revenues amid the pandemic.

However, recent data showing a spike of workers moving to the San Francisco Bay Area is offering a spark of hope.

What's happening: The region saw the second-largest gain in worker population of any area in the U.S., Recode reported last week, citing data from a LinkedIn workforce report this month.

• For every 100,000 people on LinkedIn, 83 moved to San Francisco in the last 12 months, according to LinkedIn.
• That data is limited in that it includes only people who update their LinkedIn profiles, but it's promising news for San Francisco, which had the steepest population drop of any large city in the U.S. between July 2020 and July 2021, according to census data.
• Meanwhile, U.S. Postal Service data shows fewer people are leaving the city, according to Recode.

Yes, but: San Francisco's office vacancy rate hit a record high of 27.3% in December, according to real estate company CBRE.

• And San Francisco's downtown has had the slowest pandemic-related recovery of the 62 largest cities across the U.S. and Canada, according to an analysis from the School of Cities at the University of Toronto.
• Visits to downtown San Francisco are down 31% from fall 2019, based on mobile phone data obtained by the School of Cities.

What they're saying: "Our recovery has been slow but consistent," Egan said, noting the city's unemployment rate remains low at 2%.

• But, but, but… He does expect an economic slowdown this year to affect San Francisco "somewhat worse than other places because of our reliance on tech."
• Egan said the city won't return to normal until "the buildings are reconfigured for a hybrid world and find new tenants, and the daily office worker population returns to something like pre-pandemic levels."

Between the lines: Despite the struggles of downtown San Francisco, there have been some bright spots in the area.

• Salesforce's annual takeover of downtown did its part in providing a jolt to tourism, resulting in a 91.5% hotel occupancy rate for the first two days of its October conference.
• In December, construction began on a renovation of the Transamerica Pyramid Center, which the developer has said could make it "the heart of San Francisco."

What to watch: San Francisco Mayor London Breed told Bloomberg in October that she's trying to attract new industries to downtown and generally "reinvent, recreate and reinvest" in vacant commercial spaces.