San Francisco Techsodus & Unwind of Office Hogging Sink Office Market. Sublease Explodes, Leasing Freezes up, Rents Drop

From fake “office shortage” to historic glut in no time.

By Wolf Richter for WOLF STREET.

Oracle, after announcing in December that it would move its Corporate Headquarters from Redwood City in Silicon Valley to its campus in Austin, Texas, and after putting its 17-story office tower in San Jose up for sale, thereby becoming part of the California Techsodus, has now put four of the five floors it leases in San Francisco on the sublease market. The listing was first reported by the San Francisco Business Times. Oracle’s lease on these four floors — 85,622 square feet in total — in the 21-story tower at 475 Sansome Street in the Financial District runs through June 30, 2023. More office space that needs to find occupants was thereby dumped on the already record high San Francisco sublease market.

Vacant sublease space explodes.

At the end of the fourth quarter, sublease office space jumped to 7.23 million square feet (msf), according to Cushman and Wakefield – an all-time record high, exceeding by a huge margin the peak during the Financial Crisis and the Dotcom Bust. Sublease space accounted for 52% of the total vacant office space.

Vacant space put on the market directly by landlords rose to 6.72 msf in the fourth quarter, exceeding the peak during the Financial Crisis, but still below the peak during the Dotcom Bust.

Total vacant office space, sublease and direct lease combined, blew by the prior records set during the Financial Crisis and the Dotcom Bust to reach 13.9 msf (chart via Cushman & Wakefield):

From fake “office shortage” to historic office glut in no time.

A good part of this office space now on the sublease market has been leased by companies that never needed this space and were just warehousing it on the assumption that they might grow into it in future years, and they hogged this space to make sure they had enough space in future years amid what was considered an “office shortage” at the time, and by hogging office space they didn’t need and that remained vacant, they contributed to, or even created, this “office shortage” and some of the highest office rents in the US. That kind of hype-and-false-narrative-based shortage can turn into a glut in no time.

Other companies that put office space on the sublease market did use their office space but now no longer need it, for whatever reason, whether they moved their operations, trimmed their operations, or sent people to work from anywhere.

Sublease space is pernicious for the office market – and good for those looking for deals – because companies that are leasing it from landlords have been paying for the lease, and will continue to pay for the lease, and by subleasing it at any amount, they can improve their bottom line. They don’t have to have a particular minimum to make their equation work. And they will cut deals to get some other company to agree to sublease that space from them.

Office leasing activity freezes up.

The office leasing activity has been put on ice in this environment, where so many companies are trying to shed office space, amid tepid interest, in a City on lockdown, with the Financial District having become a ghost town (my haunting photos of the Financial District taken during “rush hour”).

Leasing activity in Q4, in terms of new office leases signed (not including lease renewals), plunged by 85% from Q4 2019, to 295,000 sf in the fourth quarter, the lowest on record going back to the early 1990s, after having already plunged to 424,000 sf in Q3 and to 425,000 sf in Q2.

By comparison, during the Dotcom Bust, which had ravaged San Francisco, new leasing activity bottomed out at 933,000 sf in Q2 2001 (chart via Cushman & Wakefield).

For the whole year 2020, only 2.2 msf were leased, the lowest on record in the data going back to the early 1990s.

But leasing activity has been declining since mid-2019, with Q4 2019, hitting a multi-year low already. So this was something that had been brewing for a while, and the Pandemic put it into hyperdrive.

And office rents are dropping.

“Asking rents continue to adjust; sublease rents dragging down the average,” said the report, with the overall asking rent falling 8.8% year-over-year (from $82.39 per square foot per year in Q4 2019) to $75.11 in Q4 2020.

This puts Oracle’s sublease in a new light. The four floors that Oracle has put on the sublease market in San Francisco, which are in a Class A building, are priced at $60 per sf, according to sources of the Business Times; compared to the average asking rent at Class A buildings in the North Financial District, where Oracle’s office space is located, of $81.10 (according to Cushman & Wakefield data). Oracle’s asking rent would be 26% below the already dropping Q4 asking rent.

And depending on what Oracle’s own rent on that space is — it has occupied this space since 2007 — if it succeeds in subleasing that space at $60 per sf, it might actually make a little money. But it would put downward pressure on the overall office market because it would mark the rent at which there’s demand for this type of office.

This is what happens when 7.2 msf of sublease space in what is a relatively small office market – compared to Manhattan or Houston – are trying to attract interested parties. And going forward? Cushman & Wakefield sees this scenario: “Asking rents are expected to ease further during 2021 in response to the elevated vacancy, weaker demand, and the pressure brought on by sublease space ‘priced to move.’”

Americans are watching more movies than ever, but they’re watching at home. The studios are on board in a big way. Read… After 17 Years of Falling Ticket Sales, Movie Theaters Got Annihilated in 2020

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  109 comments for “San Francisco Techsodus & Unwind of Office Hogging Sink Office Market. Sublease Explodes, Leasing Freezes up, Rents Drop

  1. 2banana says:

    This is the key.

    And no amount of stimulus, vaccines and/or bailouts is going to change it.

    “But leasing activity has been declining since mid-2019, with Q4 2019, hitting a multi-year low already. So this was something that had been brewing for a while, and the Pandemic put it into hyperdrive.”

    • MCH says:

      Bet you are wrong about that; infinite stimulus and convert those buildings to house the homele… I mean people with impaired living conditions.


      I am honesty incredulous about the fact that companies were hoarding space in the most expensive office rental markets around… it is kind of like hoarding toilet paper, except the costs are far longer lasting. Cause eventually people will get around to using toilet paper. Empty office spaces on the other hand… there are places in Milpitas that were still empty as of a few years ago from the 2000 due to the telecom bubble bursting.

      • Joe Saba says:

        I’m ready to bid $1 as long as I get $10 mil renovation $ from govt free to convert it

        need to keep homeless near govt protectors(inner city)

      • Frederick says:

        Infinite stimulus will never cure the economy All it will do is destroy the dollar and ultimately make the disaster that much worse for the poor and middle class IMO

      • This is what’s happening in residential RE in CA. Buyers who never move into their homes, put them in extended remodels, with no concern for lost use, or rents. Answer is prices keep going up. More properties are held off the market. RE agents in my area are aggressively knocking on doors looking for sellers. Perhaps this is prelude to that crash, with people leaving CA. They will find out TX and FLA are not ready for them, and when there are not enough schools and too many potholes, or sinkholes, they will return.

      • Non PC says:

        Drug addict and criminal are better descriptions for the people living on the street.

    • keppered says:

      This may not be very correct to say but,
      Don’t let the door slam them in their buttocks on the way out!
      The Gold Coast will survive.

      • 2banana says:

        SF to Detroit: Hold my beer…

        • The Count says:

          Having grown up in the Bay Area (Oakland) that made me laugh!

          Thank you. I needed that. :)

        • Coleman Young says:

          So true. In the 1950s and early-1960s, Detroit was the wealthiest city with the highest per-capita income in the country. Now it’s one of the poorest cities.

  2. Tony22 says:

    Ideal housing for the unhoused. Apply rent and eviction controls to these buildings, do some modifications for pets and a security kiosk and all is well.

    Since the geniuses running San Francisco city hall have made the city The premier choice for the nation’s, strike that, the Western Hemisphere’s homeless people, with a myriad of cash and other tangible benefits, plus police permissiveness, translators, free this and that, and for the non-profits that serve them, then it only seems logical that these structures be used for shelter since the city can no longer extort the 1.5% payroll tax from the employers that once filled them. Restaurants? Some can be outfitted as feeding stations, which avoids having to install kitchens in the ex office buildings. Win win!

    • buda atum says:

      Class O of The Town and Country Planning (General Permitted Development) (England) Order 2015 made offices to dwellinghouses
      Permitted development but the unhoused don’t usually find it to be Ideal. Utilities can be in odd places and rooms can be missing windows, not to talk of lots of unhoused under one roof, but I’m certain US would do it better, somewhy.

  3. Engin-ear says:

    – “And office rents are dropping.”

    That’s a – the spirit of market is alive.

    • Millie Brown says:

      The liability of those office buildings is on the Fed’s balance sheet. The Fed owns more than half of all MBS heading towards 100%. The market spirit is very much in a vegetative state. Almost like reanimated corpses. That’s what we should called these liabilities, reanimated corpses.

      PWS says 25% of businesses are zombies but the mortgage situation is already 2x worse.

      • RightNYer says:

        The Fed owns MBS backed by residential and multifamily real estate, not commercial. It’s confusing, because apartment buildings are considered “commercial.”

  4. Paulo says:

    I would guess that the demise of CA and her cities is overstated. CA has had boom and busts before, and while freedom Texas or bustling KC might be beckoning for some, even many, I would imagine there will be some longing for much of what CA was before the tech boom/booms.

    I live in an area of which the major employer was a pulp mill and forestry. For many years the nearby small city sported the distinction of having the highest per capita wages of anywhere in Canada due to its unionised forest industry. People made big bucks. Then one day a company named Catalyst Paper announced the Elk Falls pulp mill lost the lottery, and would close. Everyone thought the city would not survive and/or would certainly go into a big decline. Nothing happened. Housing prices dropped for a year or two, some support industries consolidated and pulled up stakes, but since then the city has grown at least 25% and is more prosperous than ever.

    The old adage of, “They don’t make anymore waterfront” is pretty applicable to the entire west coast. There will be some retrenchment, but the ‘end’ will not be any time soon, imho. People say Austin is pretty nice, but the comments other Texans make about it sounds like they are talking about Sweden or Denmark, maybe the Kremlin. Where would you like to live, near the sea or where AC is necessary for survival?

    • Anthony A. says:

      Paulo….I am a 28 year resident of Texas (almost a native…LOL). Take my word for it….Austin is not really like the rest of Texas. It’s more like some liberal town in California.

      • RightNYer says:

        Wait until all of the current illegal aliens get amnesty and citizenship. Texas and Florida will flip blue permanently by 2024 or 2028 at the latest.

        • Anthony A. says:

          You have to remember that Texas was once part of Mexico. It’s called reversion to the mean. Once that happens, that sure will fix what’s currently going on in Austin. I’m leaning Spanish as fast as I can.

        • Petunia says:

          Latinos are being priced out of south FL. One of the Spanish channels in Miami, now owned by some hedge fund, just downsized massively. The hedge funders from NY and CT are the ones displacing the middle/working class.

      • Apple says:

        Wait until the Oracle employees find out those non-compete clauses are now fully enforceable in Texas.

        • The artist formerly know as Marcus says:

          You raise a good point. I definitely benefited from the lack of non-compete clauses in CA. It’s what allows the tech and biotech folks change jobs, often with better terms. Is TX different?

        • Anthony A. says:

          My previous two employers in Texas both required me signing a non-compete document. It’s enforceable here in a court.

        • RightNYer says:

          Anthony, that’s a bit simplistic. Non-competes are very heavily restricted in California, as noted, but they’re not ALWAYS enforceable in Texas or most other states. Courts do a fact based analysis when deciding whether to uphold them. The salient test is whether or not it unreasonably restricts one’s ability to make a living. Something prohibiting you from working in the defense industry in Harris County would probably be upheld, if it’s for a year or so. Something prohibiting you from working as an accountant anywhere in America will not be. There’s a lot of in-between there, but in my experience, it’s the FEAR of being sued that keeps employees in line, not that companies actually DO sue if they go to competing companies.

          Note: This is completely separate from stealing trade secrets, intellectual property, customers/clients and so forth. Agreements like that are almost always enforceable.

        • C Darrow says:

          Has anyone actually seen a trial on enforcing a non-compete clause? Wouldn’t a defendant insist on a jury trial? How would a jury react to an employer denying someone their livelihood? In Detroit, I can’t imagine any employer winning. Most jurors will see a parallel between a non-compete and slavery.

      • NBay says:

        Believe that is what Paulo is saying. But for what it’s worth, CA has Redding, equally out of place. But I, at least, think this is the more relevant discussion, re, the coasts vs flyover, having studied Calvinism at length.

        • NBay says:

          There used to be an old joke about Republicans and Democrats.

          “We’ll stay out of your wallets, if you stay out of our bedrooms.”

          No longer very relevant……..maybe I picked it up on Haight St. 66-7. Long before Reagan hit the Whitehouse, and became an eager and more powerful stupid puppet for the oligarch voting opinion manipulators. Actually he was torturing us hippies then as much as he could, come to think of it, as Gov.

    • Brant Lee says:

      It’s the miserable humidity as you go further East that’s bad. Warm weather in Texas and on Eastward is nothing like southern California warm and on up to Canada. I feel sorry for Californians if they haven’t experienced the Southern humidity before moving to Texas or the east coast.

      • MCH says:

        Houston is some kind of special when it comes to crappy humidity. TX is one of those places where the lack of functional air conditioning is a killer for anyone living there.

        • MiTurn says:

          “Houston is some kind of special when it comes to crappy humidity.”

          Oh, and the instant flooding. There’s a reason every house is built on a mound of dirt.

    • Ridgetop says:

      “I would imagine there will be some longing for much of what CA was before the tech boom/booms.”

      I being a native of Silicon Valley, so true, there is a longing of the way it was, and some of it a has come true, traffic on some of the main suburban streets has diminished considerably, not sure how long that will last but enjoying it in the mean time.
      Silicon Valley has seen boom and bust for the last 40 years. Back in the eighties and nineties after the run up in housing values , homeowners would cash out and move to Phoenix or Boise. I am sure a lot stayed, but quite a few did not and wanted to move back. They could not, because while they were gone they were priced out of the Bay Area housing market.

      This boom bust cycle may boom again, “Same as it ever was”.

      Legacy companies are moving out, that may be ok, it makes room for new start ups , starting a new cycle of products (like it has in the past).
      But what worries me is “this time is different?”, extremely increased homelessness, crime and overcrowding. California wants to increase tax’s (again!) while the tax base ( Companies and the rich) are moving out of California.

      Time will tell?

      • Happy1 says:

        The Bay area will always be a great place to build a cutting edge business as long as it has world class universities. That isn’t changing any time soon. And the weather and scenery is amazing. The diversity of ethnicity and quality of food and produce is unmatched.

        But the social climate has deteriorated. The politics, which used to be mixed at least in the suburbs, are now a monoculture. Even 20 years ago the state legislature was almost evenly divided, now it’s a one party state, and that never leads to good governance.

        Homelessness is out of control, not just in SF, also in the suburbs. SF is much dirtier and the public infrastructure is decaying. Income and sales taxes are simply out of control in a way they weren’t 30 years ago. It’s a great place for the very wealthy and for immigrants who don’t mind living 12 to a room, but totally unliveable for the middle class. The few areas with excellent public schools have become completely unattainable for middle class home buyers.

        So SF will be a great city for many years, and the Bay area will be the epicenter of tech for the foreseeable future. But it is no longer a great place to live for the middle class. Hasn’t been for at least 20 years.

        • Roger Bacon says:

          Actually the reason for Silicon Valley was cheap land and limited government bureaucracy. Shockley moved to Palo Alto because it was his hometown. His major work took place at Bell Labs in New Jersey. It’s a different environment today. Today, Steve Jobs would not have gotten close to anything tech. The work he did at HP would have been outsourced to China. The work he did at Atari would have been done by an Indian with an H1-B visa.

        • NBay says:

          Shockley may get the transistor credit, but as so many times in science, he just got to be there at the end of a long long effort by many. Even energy/matter equivalency was becoming quite evident, and Einstein just formalized the first “elegant” equation, and suggested/picked the constant.
          Other than that Shockley was a racist a-hole, with no Bio training for his spew of garbage. Just Nobel creds.

  5. Anthony says:

    The mystery at the moment is how far this all will drop and what will happen to the San Francisco economy? I guess we all need to buy a crystal ball….that is, as long as they’ve dropped in price as well…

  6. Seneca’s Cliff says:

    The way of the world is reversal. Fate or Karma often acts to level the playing field when things get out of whack. The NYC and SF metro areas had grown to fat, soaking up all the easy money created since 2000. Now comes a whack aside the head to redistribute some morsels out among the fly-over burgs.

    • NBay says:

      I dunno. Port cities throughout history have always been special. Not only for shipping, but for mixing other cultures and swapping new ideas. All my relative are in flyover, but I’m glad I’m here…lucky, even.

  7. Aussie Andy says:

    Should give we work a call.

  8. Karen says:

    Don’t you just love the word “ease”… as per Cushman & Wakefield, “asking rents are expected to ease further in 2021…”

    It’s right up there with “pullback” and “retrace.” All those comforting terms that remind the listener that the trend is definitely still up.

    • Wolf Richter says:


      Yes, I thought “ease” was very elegant. That’s why I used the quote. I should start using “ease” too, instead of “plunge.” So maybe a year from now, I might write “…eased by 26% in 2021” ?

      • Anthony A. says:

        Something less elegant than “ease” and not as sharp as “plunge”….maybe use “slide”, “slipped”, “slid”, etc. LOL

      • Javert Chip says:

        Perhaps need to revisit “…things never go to hell in a straight line…”

        Maybe something along the line of: “…when going to hell, things ease on down in a non-linear manner…’.

        (All things considered, the original Wolfism is much better).

      • Young says:

        Take it easy!!

        I am still trying to decipher what “negative growth” means.

      • How about “implode” since I regret to opine that that is the condition we are currently in?! Humpty Dumpty will turn out to have been made of eggshell after all! Or a Sand Castle made out of 70% debt is vulnerable to the Rising Tide of economic suppression via Lockdowns. No room for Snowflakes in this environment or we will have too many puddles to jump.

      • KGC says:

        Try “corrected” or “revisited”.

        I’ve lived in eight States (CA, MD, WA, MO, AL, OH, WI, & AZ) and multiple places (north and south), with over 25 years, in CA. I love the State in many ways, but can’t live there any more. Most of my friends have left too, even those with roots going back generations.

        But the thing is, if you leave it’s exceptionally difficult to go back. I left Pasadena to find I couldn’t afford Napa when the job moved me back one time, or San Jose after another move. Property values rise faster than income, even in down years. I don’t see that changing.

    • B.A.C.A.H. says:

      Karen’s point about “ease’ is fascinating because “Lease” minus “L” is ease.

      There’s got to be some cute or ironic wisdom there but I’m not creative enough to figure out what it is.

  9. cas127 says:

    “and by hogging office space they didn’t need and that remained vacant, they contributed to, or even created, this “office shortage”

    Financialization (by which I mean corp invt speculation vs. true corp demand) of the real asset markets is greatly abetted by ZIRP.

    Discounted cash flow calculations (altered dramatically by interest rate changes) can be reset a helluva lot faster than any real asset investment project can be implemented.

    So *existing* asset (home, office bldg, etc.) values are going to move faster, more dramatically, and with a hell of a lot less actual work than any “new asset creation” (and associated new employment) that the Fed actually wants.

    And since that ZIRP driven demand is not organic (ie there is no true corp need for it at the moment) it is subject to rapid evaporation…creating a yo-yo’ing volatility in prices.

    This is the point you were making.

    Which is bad enough in the financial mkts but ruinous in the real asset mkts (with much longer lead times and much higher frictional costs when changing production levels).

    You would have thought that after decades of ZIRP bubble wreckage strewn across the landscape, both corporations and the Fed would have become more circumspect.

  10. Martha Careful says:

    Looks like a trend towards downsizing and making square feet to net profit ratio more efficient (with virtual work from home in jammies).

    Actually, if one steps back for perspective, the consolidation of tech and everything resulted in these mega firms “hogging” space everywhere and using bloated scale to dominate the economy. Now that these poor giants realize they don’t need all that space, their in-your-face presence will be offset by a super invisible virtual presence, where the topcat employees can work from anywhere.

    This will obviously place great pressure on commercial RE from top to bottom — and connects to stuff like shopping mall retail spaces and a very de-centralized economy — which probably fits in well down the road — with a post pandemic recovery, where people will adapt to a strange new world.

    As a side note, it’s interesting that there’s talk of a $15 min wage, because, if lower end jobs sort of consolidate to become more efficient, there is an implication that service people, like cooks and delivery people will be decentralized, versus consolidated in urbanized dense locations.

    The Neo-Darwinism economy will become far more efficient from top to bottom as everyone adapts to the next stages of social change. These tech leases are obviously dinosaurs in a tar pit.

    • Robert says:

      If taxes on these CR properties don’t decline quickly, I would assume many of the property owners could go bankrupt. I would assume when the property is sold at a loss, the property taxes on th CR will be reassessed down. Or maybe not at all, I don’t know.

      It would seem the drop in rents will eventually push down local government revenue.

      • Martha Careful says:

        Here’s p[art of a story about entities like walmart attempting to pay less tx on property. This will be interesting as more and more retail spaces fail, or don’t fit with new shopping (or working) routines. A lot of counties will be challenged by this new tax burden, which might be passed onto homeowners — at least homeowners that aren’t getting a break on taxes, like lower income seniors. Maybe that’s a bubble popper down the road?

        “In a public hearing, critics urged members of the Legislature’s Committee on Taxation to endorse a bill that would ban a controversial practice big-box retailers have been using in Maine and across the country to try to lower their property tax bills. The practice, known as “dark store theory,” involves arguing that large retail spaces are routinely overvalued for tax purposes because the properties, if vacated, would be largely unappealing to potential buyers and would sell for less than their assessed value.

        “Across the country, the large retailers that own big-box stores have used this dubious legal theory to challenge local assessments, arguing they should be taxed as if their properties were shuttered and vacant ‘dark stores’ – even while they’re open for business and raking in revenue,” said Sarah Austin, a policy analyst for the left-leaning Maine Center for Economic Policy, who authored a report on the practice in October. “It’s an effort by major corporations to manipulate the tax code so they pay less, leaving towns and other property taxpayers holding the bill.””

        • lenert says:

          You can’t find the bottom of that stanky truck bed for all the bad faith sloshing around in it.

        • Lisa_Hooker says:

          If you take the liberal side of that argument then all these empty buildings should be taxed as if they held booming businesses. That seems to fit the liberal agenda well.

        • RightNYer says:

          The property really should be taxed on the then FMV, and for a commercial property, the value is a direct function of the rents it can command. Meaning that if a landlord is getting $100 per square foot and the market drops, if the tenant moves out and the market rates are now only $60, the landlord should not get taxed as if it was empty if he’s unwilling to rent it for $60 while waiting for values to increase.

          It’s tough. I can see both sides.

        • S Walton says:

          Wait a second! There’s a WalMart in San Francisco?

      • lenert says:

        Plus abatements – how many are actually paying anything now?

        • Martha Careful says:

          This gets into interesting ideas about how a private corp, like walmart, cuts deals with local taxing authorities, who both claim to be cutting deals to generate (low income) employment. That farce should end and sweetheart subsidies need to be illegal, but that type of corruption is systemic on a global scale.

          It’s also interesting to ponder the $15/min wage concept in terms of corporations like walmart paying higher national wages, versus benefitting from low wages and tax breaks in places like Texas. I imagine there will be a huge fight over that, but citizen tax payers should be in favor of their corporate brothers actually paying taxes, versus being treated as a an exempt class of pirates.

        • Harrold says:

          Walmart does not pay $15/hr for all jobs, just a few departments (deli/bakery).

      • Javert Chip says:


        Every state has it’s own unique regimen; the generic routine is something like:

        o property assessed value reset at time of arms-length sale
        o property reassessed (or assumed to increase at some rate) periodically
        o Some (but not all) states (CA & FL) restrict how much property tax can increase in a given year
        o Property owners have the right to contest assessed value for taxation

      • Sea Creature says:

        I remember in the early 90s depression / recession in Canada, property companies would tear down perfectly good buildings which they knew would be empty for a long time, as the property tax savings were so great by getting rid of the buildings..

  11. Crush the Peasants! says:

    Can’t they just put the homeless in the abandoned offices, give them a desk and phone, and give them the ABC pep talk?

    ABC. ‘A’, always. ‘B’, be. ‘C’, closing. ALWAYS BE CLOSING. Always be closing.

    • Heinz says:

      You bring to mind images of homeless tents and cardboard boxes set up in former offices that housed Big Tech’s movers and shakers.

  12. Anthony A. says:

    Not to go unnoticed, the Houston, Texas office vacancy rates are following the same pattern as SF. Headline in Colliers International reads:

    “Houston’s office market posts negative absorption in Q3 2020, pushing the year-to-date total to over -2.8M SF” (vacant). That number is growing as the report states:

    “Office Development Pipeline:

    3.9 million SF of new office space is under construction, and approximately 67% is pre-leased. 2.2 million SF is spec development, of which 34% is pre-leased.” I really wonder how this will actually work out when the time comes to take occupancy?

    So new stuff (3.9 mm/Sq/Ft) is coming on the market and only partially pre-leased.

    Commercial rents are between $30 – $40/sq. ft. based on location, etc. These vacancies are a result of the 14 or so oil companies that went BK in 2019-2020 and scores of others that cut back employees.

    I have a daughter-in-law in my extended family that was an oil & Gas accountant for a BK firm who was let go last February. She still has not found work.

    Even if the Covid19 pandemic gets resolved, the energy price dilemma will still impact this area of Texas

    • California Bob says:

      I believe you’ve mentioned your daughter-in-law’s predicament in previous articles. At this point, I’m willing to accept any change in her status–hopefully, gainful re-employment–as a credible ‘leading indicator’ of the economy’s direction (probably as good as any of the ‘official’ ones). Please keep us posted.

    • George says:

      Texas is interesting. Traditional businesses are suffering, but the economy is booming with the influx of businesses and people fleeing the wacky parts of the country. Every unemployed oil worker thinks he can sell his house at California prices.

      • 91B20 1stCav (AUS) says:

        George-reminds me (apocryphally) of my time in the Spokane/Cd’A area in the 90’s-people arriving from CA then, too, but also, interestingly from TX. These folks came flush with funds from sales of their former houses, buying property at what, to them, were fire sale prices. The locals were chortling about how they had skinned the new folks (akin to your ‘unemployed oil worker’ comment). Flash forward a very few years and both groups were discontent-the newbies because salaries/wages remained stubbornly well-below what they had left behind, the oldies because property values had increased so much that their kids could no longer afford anything ‘decent’ at prevailing local labor rates.

        Through a very fortunate conflation of events, i was able to return to CA in ’98 after eight years of what started out as a six month temporary work assignment. Most could not, even back then.

        Plus ca change, plus ca meme chose.

        may we all find a better day.

  13. polecat says:

    Wasted resources, Wasted assets, Wasted Tech bloat!

    I have no sympathy for these idiot firms. May they rot in Hell!

  14. Tom Stone says:

    It’s early, but some good deals are clearly coming in SF for both high end condo’s and Commercial properties.
    As always, buy the location first, it’s always about the dirt.

  15. Ron says:

    I believe thiss is a worldwide problem look at China still building everything is in excess cars tv computers efficiency has created a never enough economy of junk not needed at an older age we begin to figure it out less is more

    • MCH says:

      Not to worry, two words will fix this problem, and China has learned those words well from the world’s most product and consumer focused, not to mention ethical company run by someone whose North Star is the pinnacle of fairness and equality, the two words?

      planned obsolescence.

  16. Boomer says:

    According to the latest UHaul stats Tennessee is the number one destination for people on the move. Texas and Florida next. California 50th. I’ll still be here when they come back.

    • California Bob says:

      Me too.

    • Boomer, me thinks that the vast majority of Former Californians will never come back to the once Golden State because for no other reason than the State is fiscally bankrupt and is desperately looking for more sheep to shear. But I just heard on Fox that there is a human sea of potential immigrants coming up from Central America getting ready to storm the gates of California. The massive problem is that none of them will have jobs when they get there.

      • Wolf Richter says:

        They might be heading for Texas and Arizona. Immigrants from Asia like to go to California.

        • Rev GJ says:

          My neighborhood in San Mateo is becoming more and more asian…my wife is asian, and she was the only one for a few blocks when we first got married…good schools help.

    • Anthony A. says:

      If you stay out of California for too long, you generally can’t go back. We left Ventura County (Thousand Oaks) in the early 1990’s. We could not afford to buy back our 2.600 sq. ft. house at the current prices if we sold here and decided to go back.

  17. Javert Chip says:

    There are a couple other fragile eco-systems: John Wanamaker (late 19th century) once said he knew half of his advertising was wasted, he just didn’t know which half.

    Looking at the non-e-commerce web (ie: sites NOT selling stuff), a few run on contributions, subscriptions and limited advertising (eg: the marvelously curated Wolf Street), the vast majority of the rest runs on a model whose owners need revenue and pretend to believe their site’s visitors find being force-feed oceans of poorly produced advertising crap to be “meaningful”, even “useful”.

    It’s easy to see this isn’t anywhere near true (ref % using ad blockers). Nobody ever goes to a random website (eg: albeit the marvelously produced Wolf Street) to look at car ads.

    One day there will be a reckoning that charging to force-feed surfers with overwhelming numbers of inane, poorly produced, advertising trivia is vastly overpriced (GASP! HOLY BUSINESS PLAN, BATMAN!); Apple’s intent to give its customers significantly enhanced control over data will be an interesting point discontinuity in web advertising.

    I want free website access, but I use an ad blocker. The sheer volume and disruption of a non-blocked site is stunning. I wouldn’t not mind a few ads, but I don’t want Google surreptitiously tracking & selling my data, including reading my emails (explaining why I use DuckDuckGo).

    • Petunia says:

      I had forgotten Wanamakers, the department store, it sold great quality merchandise. None of the luxury brands today, can compete with the quality of Wanamakers merchandise. They sold shirts made of French fabrics, which felt wonderful and looked beautiful too, for $30. We traded Wanamakers for Walmart.

    • Javert, case in point, go to and get ready to be bombarded with everything and anything but the Weather!!

      • 91B20 1stCav (AUS) says:

        David-that’s why the NOAA/NWS site is hands-down a great national resource-be sure to read the ‘forecast discussion’ (updated roughly every six hours) after the initial location load, and, if in an area of high relief, adjust the map closer to your actual location/altitude (the commercial sites get the bulk of their data from them, anyway…). No sharpies needed…

        may we all find a better day.

        • NBay says:

          Thanks for the tip…will try it….Weather takes a long time to load because of ads. I have very slow speed (768kbps due to phone lines in apt building). But I don’t care much for video, anyway, would rather be able to easily back up or dwell on something…e.g., Read.
          TV is still cable-nasty cable. Hated them since they showed up, being out of range of SF broadcast or blocked by hills, usually. Ocean fishing buddy gave me a link to many local offshore buoys, was great, especially water temp changes.

        • 91B20 1stCav (AUS) says:

          NBay-yup, no ads, plenty of text (graphics, too), AND for any U.S. location at the entry of a zipcode or city name. If you want to take the time, there are enough resources to give an undergrad-level knowledge of meteorology/climatology-as i stated, imho, a great bang for our taxpayer’s buck…

          may we all find a better day.

    • Unix says:

      Some people use phones without iOS and Android. Data usage drops considerably, and the phones are much faster. Unfortunately, you have to be pretty tech savvy to use.

  18. MarMar says:

    Wolf, any chance you can extend those graphs back to 1999 or 2000 so we can visually compare the current situation to the Dotcom boom/bust and the financial crisis?

    • Wolf Richter says:


      The guy I know at Cushman & Wakefield in SF said last week that he would send me the actual data in spreadsheet format, so that I could build my own charts going back to the 1990s. But it didn’t happen, and I never got those spreadsheets — maybe the efficiencies of working from home or something ?. So I ran with their charts because I didn’t want to drag this article out any further. Hopefully, I’ll get the data by the end of Q1, and then on my next update, I’ll have my own charts.

    • keppered says:

      That’s some touchy territory and time consuming.

  19. Learner3 says:

    Living in North Dallas, there are a few things newbies have to adjust to. As the president of Toyota says, there are 4 seasons, Hot, Hotter, Gawd it is Hot, and Christmas. Thirty plus straight days of 100+ degrees takes some adjusting to. That doesn’t bother me near as much as 90+ degrees at 11 pm. Stepping in your first fire ant pile barefooted and finding out why they call them FIRE ants. And introduction to good old “henries”. That is what my mother called the 3 inch long flying cockroaches. They are just a roach but it will give you the willies when it lands on your neck and crawls down your back.

    • Lou Mannheim says:

      I was up at 5am and it was in the teens and windy. The trip to the woodpile was not fun, but in about 30 minutes the house was warming up. About to head out and shovel the light snow that fell overnight. New England in January.

      Which is a long way to go to say I do not miss that demoralizing heat!

    • roddy6667 says:

      In the far North of Maine they have two seasons. Fourth Of July and Winter.

      • Jeff T says:

        Good one roddy6667.

      • makruger says:

        Raised in Northern Vermont we stated it another way, 9 months of winter and 3 months of lousy sledding. But with climate change those three months have become 5 and are now getting increasingly hotter and more humid. Still beats living in Phoenix though. Tucson is much nicer anyway.

      • Lynn says:

        My friend is stuck there. She bought a gorgeous well maintained and rebuilt 1927 house on 6 acres for $140K. She loves the house and can’t bear to sell it and move back west now.

  20. CGay says:

    MarMar, I was thii on making the same thing since as we know, SF economy (and real estate) is cyclical

  21. Shiloh1 says:

    Sleep pods as an added benefit for the hipster high rise offices in the cities.

  22. Xavier Caveat says:

    If San Franciscans move to Frisco, Tx., will that work with their psyche?

    • MCH says:

      Sure, especially if they keep paying CA income taxes… what???? It’s fair, after all, it’s not like they have to pay income taxes in TX, so why not spread that money back to CA, it’s called fair distribution of wealth.

      • Bet says:

        I lived in south Texas for twenty years. Texas might not have an income tax but it will tax you on about everything else. As a landowner I was taxed , property and school tax , same on my car. My business was taxed on furniture equipment office supplies.
        Big bidness is smart they only lease buildings. Don’t own property

        • RightNYer says:

          In New York and New Jersey, you pay high income taxes, IN ADDITION to high sales and property taxes.

        • MCH says:

          In some ways that’s a lot more progressive than others. Plus there is still a 8% sales tax.

    • polecat says:

      If they undershoot, and instead land west within the confines of the Sacramento Mountains, well .. they’ll be put out for sure!

  23. Felix_47 says:

    How will tech gets H1Bs to move from Calcutta or Mumbai to Texas? Would they not find it more attractive to be in places like Sweden, Germany or Finland….all countries with a software presence. The SF area is relatively congenial to that but Texas or Tennessee? It may make more sense for them to simply work remotely from home. One attraction of California is that it attracts workers from other countries pretty easily and offers a multicultural environment.

  24. timbers says:

    What’s happening with San Fran office rentals might be similar to what would going on in stock markets if the Fed didn’t QE in it’s tool box. A nation experiencing common events both good and bad in a broad based way instead of based on how much assets one has can have a unifying affect.

  25. CreditGB says:

    Being in Government imposed lock down, I missed a lot of news.

    How’s old WeWork (or whatever they named it) doing?
    How about retail malls, and theaters. Zero revenue must be getting financially corrosive.
    How about lenders with big exposures to these now zero revenue businesses?
    Will we see even more vacant real estate up for sale and rotting away from lack of maintenance?
    Just asking.

  26. Martha Careful says:

    FRED thing:

    All-Transactions House Price Index for California (CASTHPI)


    State Government Tax Collections, Property Taxes in California, Thousands of Dollars, Not Seasonally Adjusted (CAPROPTAX)

    I reckon it’s only fair to look at Texas:

    Nope, have no clue what property tax is about in texas, no data —

    Thought it might be at The Census Bureau or FRED, but no … hmmm (help?)

    The Annual Survey of State Government Tax Collections (STC) provides a summary of taxes collected by state for 5 broad tax categories and up to 25 tax subcategories.

    However, the following source @ The Tax Foundation says tax are high down yonder:

    To What Extent Does Your State Rely on Property Taxes?
    January 19, 2021

    Janelle Cammenga

    • Martha, here in sunny Frederick County VA, the county increased appraisals in 2020 by some 10% to take advantage of the totally crazy housing market here (to make up partially for the revenue lost on the 10% Entertainment Tax we Rebels get hit with each time we eat out or rent a motel room). Now just waiting for the other shoe to drop and they increase the tax rate on residential property in a county that has not avoided the economic implosion of 2020 from Bat Flu Shutdowns (BFS).

      If they cut the police force or fire dept., then I am out of here!!!

      • Martha Careful says:


        An interesting way to think about this is to see that some corporations with real estate, are somewhat like a senior citizen, living on a fixed income. Is in unreal to think a homeowner might see a 125% value gain, while their actual net income goes up 1%+/-?

        Lower income seniors often apply for property tax relief, so in some ways, that seems fair for certain stressed-out entities. However, in a case like walmart, they abandon massive stores, then move 2 blocks away and demand lower taxes …

        Your point about cutting civic services is well taken, but where I live, the schools, libraries, hospitals and every unionized position are all wanting more tax dollars, all the time, often to help increase pensions. The future will become bleaker as more companies abandon commercial spaces and virtualize themselves into invisible entities that pay less and less for community tax burdens.

        I’m feeling that municipal taxes an unfolding black swan and that swan fits well with urban decay, the pandemic, unfunded pensions and a collapse in CR, linked to an explosion in rural home value. Overall, not a great fit!

  27. cd says:

    still can’t short commercial RE symbols, the fed has that market locked up… one defaults anymore, its the rainbow economy

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