SAN FRANCISCO - The number of vacant offices in San Francisco is skyrocketing and the ongoing pandemic is to blame.
Recent visitors to San Francisco say after the initial shutdown the city was a virtual ghost town.
"You can see that it's slowed down, the stores with plywood over the windows that kind of stuff," said Gordon Silvera from Berkeley. "So, it's better but a long way from good."
Now, a new study from real estate company Cushman & Wakefield shows that since the stay home orders were put into place and people began working at home, office vacancy rates have skyrocketed.
"Our vacancy rate at the end of September was 14.1%," said Cushman & Wakefield researcher Robert Sammons "That's the highest in almost a decade."
Sammons says almost half of the available space is sublease space, tenants looking to rent out space they've already rented. Some of vacancy is attributable to regular churn as businesses move around the Bay Area and across the country. But now, no one is stepping up to rent that space.
"Over the past couple of quarters we've recorded the least new leasing activity going back as far as our records going back to the early 1990's," said Sammons. "Even going back to the dot-com recession there was more new leasing activity on a quarterly basis."
San Francisco's Chamber of Commerce is concerned that the high vacancy rate could impact other businesses which rely on a busy downtown.
"When you have a 14% vacancy rate you're essentially saying their foot traffic has dropped 14% overnight," said Jay Cheng from the Chamber. "And that can be devastating. Even when we come back from the pandemic, if we are not able to fill in that vacancy rate it means that those small businesses will never replace those customers."
Experts say the turning point should come after the development of a vaccine or effective treatment for COVID-19, once people feel confident enough to come together again in large groups. Until then expect more empty offices.
"We expect vacancy to continue to climb into next year and top out, probably at about 20% or so, which certainly would be the highest since the dot com recession," said Sammons.
The one possible silver lining, high vacancy is already pushing down rent prices, creating opportunity for new businesses. "Our hope is that after the pandemic, this is really a time for innovators and entrepreneurs to spring back up again," said Cheng
The vacancies aren't just happening in San Francisco, it's part of a world wide trend.
World wide office occupancy rates are expected to return to pre-pandemic rates sometime in 2025, but experts say San Francisco, with its edge in the tech industry should recover sooner than that.