San Francisco loses billions a year due to local telecommuting spending

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It’s no secret that downtown San Francisco has been struggling in recent years: 25 million square feet of commercial space is empty, tech companies have closed their regular offices, and news of layoffs is relentless.

Now, a new report shows that San Francisco’s famous flexible work-from-home policy could have cost the city billions.. Workers in San Francisco spend about $3,567 less a year on things like entertainment, restaurants, and shopping near where they work.

Cause? According to new data from the WFH research group, the workforce has been reduced by 34.7%.

READ MORE: Surreal moment: Downtown San Francisco office hasn’t been touched since the pandemic ended

Overall, The Standard estimates that the annual cost loss for San Francisco’s entire residential and suburban workforce could exceed $2.9 billion.

The standard calculated the total by multiplying the cost loss per worker ($3,567) by the approximately 820,000 Bay Area residents and commuters who work in San Francisco, based on data provided by the American Public Survey and the Office of the San Francisco Comptroller. (SF workers younger than 20 and older than 60 are excluded to better approximate WFH Research’s sample parameters.)

WFH research has found that cuts in consumer spending near workplaces are most severely impacting cities, with longer commutes, stricter Covid restrictions, and higher proportions of white-collar workers, all important factors in the Bay Area’s economy that could contribute to even more economic damage. from remoteness. Job.

Rise of remote work, downturn of inner city economy

The effects of the pandemic are well documented, with many local business owners lamenting the loss of workers who once patronized downtown restaurants and shops. But this new study shows just how much the pandemic’s work style has had a financial impact on the communities of the Bay Area, a region heavily dependent on the WFH-friendly tech industry.

Between 2019 and 2021, the number of people working from home in the US tripled, from 6% to 18%, according to the US Census Bureau. In San Francisco, that statistic has increased sevenfold., with 46% of employees working from home in 2021.

The increase in job flexibility in 2020 and 2021 was largely due to pandemic conditions. But as cities reopen and San Francisco plans to end its Covid-related public health emergency declaration, a return to in-person work is lagging far behind. The beleaguered city center in particular has taken the biggest economic hit from teleworking and remains almost a ghost town.

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Result? San Franciscans spend far less money every year on food, shopping, and entertainment near work. Other major metropolitan areas have seen an even sharper drop in consumer spending, with New Yorkers spending $4,661 less per person a year, sucking more than $12 billion in spending from the financial center.

But the data doesn’t tell the whole story, and the researchers warn that the region could be losing far more money than the WFH data shows, simply because many workers no longer work in the Bay Area.

“We have been asking people about their spending habits since before the pandemic in 2020, but we are looking at people whose work currently based in the Bay Area,” said José María Barrero, WFH group researcher and professor of finance at the Instituto Tecnológico Autonomo de México. “Perhaps the bay area looks like it has less contraction [in consumer spending] than in reality, because these people have already left. When a person answers a survey, they are already saying, “My work is somewhere else.”

California just keeps shrinking, and the Bay Area’s population decline in the 2020s has outpaced that of the state. The Bay Area has lost more than 217,000 people since 2020, with San Francisco itself outpacing the wider region with an overall population decline of 4.4% over that period.

“Significant population movements and migrations in any direction could have major implications for the area’s economy, housing markets, utilities, quality of life and even its environment,” said Patrick Carlyle, market analyst at Compass Real Estate.

What this means for San Francisco is fewer employees looking for a good place to meet for coffee, empty restaurants and lagging home sales in regions that once served as the city’s job hub.

“The Donut Effect”

City economist Ted Egan warns that cuts in spending on jobs, especially in the city’s central corridor, could be reallocated to other parts of the city or regions in the bay.

” [WFH Research Group] just trying to measure changes in spending near jobs,” Egan said. “[WFH] estimates that each worker will spend less time near his workplace in proportion to how much he works at home. This income will of course be available for spending on other things in the region.”

Many workers may also move to nearby regions, which in turn supports their economy. Compass data has shown that the majority of people moving from a Bay Area county are moving to neighboring counties, often more affordable and less densely populated.

Dubbed the “donut effect” by Stanford University economists, in 2020 and 2021 many households and businesses have moved from central business districts (economists talk about city centers) to lower-density suburbs. The pandemic has effectively devastated city centers like San Francisco. , driving down rents and hurting city finances through lost taxes.

Economists see [this pattern] in rental rates,” Barrero said. “It seems to me that the Bay Area is likely to have more of a donut effect than other cities because it is heavily dominated by tech and there is a lot more work from home in tech than, say, finance, consulting or law. And secondly, I think it’s just really nice to live in the Bay Area and not in San Francisco. It’s kind of like a domino effect.”

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