Snap, the parent company to popular social media sites such as Snapchat, became the latest tech company to pull out of San Francisco this week due expensive San Francisco leasing prices and more workers in the company working at home.
This week alone, San Francisco has seen more retail establishments leave the city due to high crime rates, and Mayor London Breed giving a renewed effort in trying to convince companies not to leave offices in the city. As part of a greater trend, companies choosing to leave pricey offices in favor of more work-from-home positions, something which employees also want to have more time with family and for leisure, have hurt cities nationwide. However, with San Francisco having a more tech-based economy, and thus having more people switching to remote work, the city has been harder hit than most American cities as a result. While cities such as New York and Los Angeles have managed to climb above the 40% filled office space mark since the end of the COVID pandemic, San Francisco has been stuck under it, with nearly 2 out of every 3 offices remaining vacant in the city.
The decision by Snapchat to close its 33,000 square foot office space in the city this week, a part of its latest restructuring to save money, was not an easy one. Snap had signed a long-term lease, with the lease not set to expire until November 2024. But with costs running high, the company decided better to pay penalties now than be tied in the city for the next two years under a fixed price set at the height of the tech boom in 2017.
The office itself was opened in 2017 as part of its expansion after the company went public. Over 200 workers, mostly engineers, used the office until COVID hit in 2020. Afterwards, the office was sparingly used, becoming a co-working space rather than a more formal office for workers wanting a flexible remote-office work setup.
While Snap has not been alone, with Facebook parent Meta, Twitter, Salesforce, and other adopting remote work policies and getting out of leases in the city early, the company keeping offices in Palo Alto and Mountain View, also expensive locations, has highlighted just how much San Francisco has been maligned by companies in only the past few years.
Snap leaves SF
“Five years ago, if you were a tech company and didn’t have an office in San Francisco, it meant you were not a big player,” explained Walter Chen, an office leasing consultant in the Bay Area who focuses on tech companies, to the Globe on Friday. “Now, with San Francisco having a reputation as an expensive city that is high in crime, no one wants to be there. Especially with prices everywhere going up.
“Snapchat is really telling though. Look at those offices they still have. Palo Alto. Mountain View. Their headquarters in Santa Monica outside of LA. Los Angeles itself. New York. Seattle. London. Dubai. Tokyo. These are not cheap places. Yet San Francisco was the one to go out of all of them. That’s how a lot of tech companies view San Francisco now.”
While the company has made no official statement, CEO Evan Spiegel has previously praised the new work from home shift, citing how working from has improved many workers lives in the process.
“Being able to work from home “profoundly changed my life,” said Spiegel las month at an LA conference. “It was much harder before the pandemic, because I really rarely saw our kids.”
San Francisco’s downtown alone will have as many as 1,300 office leases expiring in 2024, some thing that may make the current tenancy retention problem in the city even worse if most aren’t renewed.
“We’re going into a recession and companies aren’t all enamored with San Francisco anymore,” added Chen. “San Francisco is going to go through quite the rough patch in the next several years.”