SF leaders urge positive narrative

The story of San Francisco has largely been one of return. The artificial intelligence industry has provided the latest lick for the boom or bust town, and Mayor Daniel Lurie has been hailed in his first year as the right person to steer a city now bursting with cash, investment and optimism. San Francisco, as they say, is back.

What could possibly slow this fiery momentum? Well, bad press seems to be a headwind everyone wants to avoid. Remember the so-called Doom Loop? In human nature, persistently negative narratives have a way of becoming self-fulfilling prophecies. This fact is apparently top of mind for the powers that be in San Francisco.

Laurie Thomas, executive director of Golden Gate Restaurant Association, said as much during a Thursday panel focused on the state of retail in San Francisco. She urged the business community to refrain from the temptation to talk to news reporters “who want the gotcha story.”

“You just have to consciously remember that we kind of build our own future,” Thomas said during the event, hosted by BisNow. She encouraged those speaking with reporters to remain factual, but positive, so that “the ball rolls down the hill in the right direction. … One of the things that’s been helpful is working closely with [Mayor Lurie’s] administration and their comms so that we all understand everything and can reposition it. The message has to stay positive.”

Joshua Callahan, managing director at private equity firm Roxborough Group, pushed back, saying that narrative and reality in San Francisco have recently diverged. Callahan acknowledged that the city enjoyed more investment than just a couple years ago, and debt was increasingly available for new projects, but the reality for business and owners and developers remains more challenging than the “San Francisco is back” narrative portrays. The costs are high and margins are thin, he said.

“It’s still not obvious that good ideas are easy projects to do,” Callahan said. “It’s still really tough to believe in that growth story. It’s tougher than some of the narratives are starting to make it seem.”

Fifty miles to the south, downtown San Jose is dealing with its own narrative vs reality. The Silicon Valley office market has long subsisted on hype. According to Joshua Burroughs, COO of local developer Urban Catalyst, 90 percent of office space is built on speculation. In a region where startups can quickly grow from a garage into a Unicorn that soaks up hundreds of thousands of square feet of office space, it’s critical for cities to have a healthy stock of ready-to-go offices.

Yet, for downtown San Jose, much of the office space is now empty, and developers like Urban Catalyst are scaling back their ambitious visions for the skyline. Building permits submitted to the city’s planning department last week showed Urban Catalyst had revised its proposal for a 21-story office tower and a 27-story mixed-use tower into a pair of eight-story apartment buildings with 626 total new housing units.

“I’ll take 600 units downtown, but to go from 20 stories to eight is uninspiring,” a local economic development analyst told The Real Deal.

This comes as the Jay Paul Company is still searching for a tenant for its 19-story, million-square-foot 200 Park project, completed in 2023. And Google’s ambitious vision for its Downtown West neighborhood with 4,000 homes, 7.3 million square feet of office space, and an estimated economic impact of $19 billion, has been on hold for years.

“There’s not no hope,” one city hall staffer told The Real Deal. “If we can’t fill 200 Park, and we can’t get the Google project going, then I don’t think we’re going to see the office market move.”