Tracking the San Francisco Tech Exodus

For almost as long as we’ve been tracking the COVID-19 pandemic, sf.citi has been closely monitoring the San Francisco tech exodus. Of course, some of the forces driving this phenomenon—remote work and the growing appeal of cities beyond San Francisco—predate 2020. Few can argue, however, that the pandemic has accelerated these trends. What we’re seeing today is nothing short of a mass migration of tech companies and tech employees outside of the San Francisco Bay Area.

To help you keep up with fast-moving data surrounding the San Francisco tech exodus, sf.citi created an all-in-one resource. Below, you’ll find the latest insights about tech’s relocation, the economic implications of a tech exodus in San Francisco, and context around the policies that have led us to where we are today.

Is there information or data about the San Francisco tech exodus you think we’re missing? Let us know by emailing info@sfciti.org. For media inquiries, please contact sf.citi Program Manager Zach Drucker at zach@sfciti.org

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EVIDENCE OF A TECH EXODUS IN SAN FRANCISCO

Tech Companies Are Leaving San Francisco

Office-Vacancy

15.9M
Square feet of vacant office space in San Francisco
(the equivalent of 10+ Salesforce Towers!)

Downsizing

63%
Companies that plan to or have already downsized their office in San Francisco

Source: sf.citi Survey

  • San Francisco’s office vacancy rate has risen to 18.7 percent with the amount of vacant office space surpassing levels after both the 2008 Great Recession and the dot-com bust. According to data from Cushman & Wakefield, San Francisco also recorded the lowest level of new leasing activity since at least the 1990s.
  • The Bay Area’s proportion of VC deal count in 2021 is expected to fall below 20 percent for the first time in history. “The COVID-19 pandemic and subsequent exodus from San Francisco will only exacerbate this trend,” writes VC analyst Kyle Stanford in PitchBook’s 2021 US Venture Capital Outlook report.

In January 2021, sf.citi surveyed 83 tech founders and CEOs, the majority of whom said they plan to downsize their presence in San Francisco and factor local regulations into their decisions to grow (or not) in San Francisco. 

Source: sf.citi Survey

Prominent Tech Companies Downsizing IN or Moving from San Francisco

Over a dozen major tech companies have downsized their office space in San Francisco or moved out of the City altogether.

Airbnb

Airbnb listed 78,565 square feet of office space at 650 Seventh Street in San Francisco’s South of Market neighborhood. The news comes shortly after Airbnb announced it would open an East Coast hub in Atlanta, Georgia.

Airbnb has marketed three of its office buildings in San Francisco for sublease, reducing its real estate footprint in San Francisco by 424,000 square feet.

Ancestry

Ancestry.com listed all 128,570 square feet of its office space in San Francisco’s South Beach neighborhood.

Brex

Brex will let its San Francisco lease expire in 2021 after Co-Founders and Co-CEOs Henrique Dubugras and Pedro Franceschi announced Brex would become a remote-first company. The Co-Founders themselves are moving to Los Angeles.

Credit Karma

Credit Karma gave up its San Francisco office altogether—and earlier than expected—opting to move all of its employees to Oakland with several being able to work from home permanently.

Digital Realty

Digital Realty announced it would move its headquarters from San Francisco to Austin, Texas. CEO A. William Stein cited Austin’s “affordable cost of living” and “supportive business climate” among reasons for the move.

Optimizely

Optimizely listed all 78,000 square feet of its corporate headquarters in San Francisco’s South of Market neighborhood for lease.

Oracle

Oracle listed four out of the five floors, or 85,622 square feet, of office space it occupies for sublease at 475 Sansome Street in San Francisco’s Financial District. This comes several months after Oracle announced that it was moving its headquarters to Austin, Texas.

PayPal

PayPal is giving up 101,000 square feet of office space in San Francisco’s South of Market neighborhood.

Pinterest

Pinterest terminated its 490,000-square-foot lease at 88 Bluxome Street in San Francisco.

Salesforce

Salesforce canceled its 325,000-square-foot lease at the unbuilt Parcel F tower in San Francisco’s Transbay district. Salesforce also listed about half the space it occupies at 350 Mission Street—roughly 225,000 square feet—for sublease. The news comes just weeks after Salesforce announced its permanent remote work policy.

Splunk

Splunk listed nearly 100,000 square feet of its office at 250 Brannan Street for sublease.

Stripe

Stripe announced it would move its headquarters to South San Francisco in 2019. Now the company is preparing to shed all 295,000 square feet of its San Francisco office.

Trulia

Trulia will sublease 105,897 square feet of office space at 535 Mission Street when its lease expires in May 2021.

Twitter

Twitter listed over 100,000 square feet of its San Francisco headquarters for sublease.

Wish

Wish listed 106,169 square feet of its office at 1 Sansome Street for sublease as the company rethinks its office space needs in a post-pandemic world.

Yelp

Yelp listed all 14 stories (161,876 square feet) of its San Francisco headquarters for lease. Although Yelp intends to maintain a presence in San Francisco, a Yelp spokesperson confirmed that remote work has prompted the company to rethink its office needs: “With more employees working remotely we’re reducing some of our footprint in San Francisco.”

San Francisco-based Initialized Capital released data on how their portfolio companies will approach offices and remote work after the pandemic. Over 36 percent of Initialized’s portfolio companies plan to be fully decentralized after the COVID-19 pandemic. And 40 percent of founders say that the best place to start a company will be in the cloud (rather than San Francisco). 

Remote Work Policies Among Prominent San Francisco Bay Area Tech Companies

Hybrid remote work:

Majority remote work until September 2021:

Majority remote work until 2022:

Tech Workers Are Also Leaving San Francisco

U-Haul-Moving-Data

-10%
Drop in San Francisco residents between March and November 2020

Rent-Decrease

-20%
Year-over-year median rent drop of a one-bedroom apartment in San Francisco

Source: Zumper

Tech-Worker-Inflow-Outflow

-35%
Year-over-year drop in the Bay Area’s tech worker inflow/outflow ratio—the steepest decline nationwide

Source: Big Technology

  • Between March and November 2020, over 80,000 people moved out of San Francisco, according to USPS address change data. That represents a 77 percent increase (or about 35,000 more requests) from the same time period in 2019. In a report by the California Policy Lab that tracks Californians’ credit history, research fellow Natalie Holmes said, “San Francisco is experiencing a unique and dramatic exodus.”
  • It’s not just that more people are leaving San Francisco; fewer people are moving into San Francisco. During the last three months of 2020, research from the California Policy Lab revealed that the number of people moving into San Francisco dropped by 25 percent compared to 2019. This drop rose to just over 27 percent for the Bay Area at large. In a report by the California Policy Lab that tracks Californians’ credit history, research fellow Natalie Holmes said, “San Francisco is experiencing a unique and dramatic exodus.”
  • In 2020, U-Haul saw a 9 percent increase in departures from San Francisco compared to 2019. Across the broader Bay Area, U-Haul arrivals from March to December 2020 dropped 31 percent year over year.
  • The Bay Area added just 96 tech workers for every 100 tech workers that left between March and October 2020.

HOW THE TECH EXODUS AFFECTS SAN FRANCISCO

Tech’s Contribution to the San Francisco Economy

Annual economic impact of San Francisco’s 100K tech jobs on the San Francisco economy

Yearly business tax revenue to San Francisco

San Francisco GDP generated by office activities

Source: Public Comment

  • San Francisco relies on a robust office space market for critical revenue, including for affordable housing. In the fall of 2019, the Board of Supervisors passed legislation to substantially increase the linkage fee on nonresidential developments—from $28.57 to $69.60 per square foot by 2022. The slowdown in San Francisco’s office space market will mean less office space development, which in turn will hurt San Francisco’s affordable housing funding. (Proposition E passed in the March 2020 San Francisco election will also not help.)

How a Tech Exodus Will Impact San Francisco’s Economy

Projected budget deficit for fiscal year 2023-24

Decrease in revenue from San Francisco sales taxes

–70%

Sales drop in downtown San Francisco businesses

Source: Chief Economist Ted Egan

Source: Chief Economist Ted Egan

  • In 2020, San Francisco’s sales tax revenue dropped by as much as 70 percent in San Francisco’s downtown, which relies heavily on restaurants and hotels.
  • The $1.9 trillion federal stimulus package reduced San Francisco’s budget deficit from $653.2 million to just $22.9 million over the next two years. Even with the support from the federal government, however, the City Controller’s Office predicts hundreds of millions of dollars in budget shortfalls over the next five years due to a widening gap between the City’s revenues and expenses. In fiscal year 2025-26, the City Controller’s Office projects a nearly $500 million budget deficit.
  • Current and future San Francisco budget deficits are directly tied to losses in hotel, business, and sales taxes. The San Francisco Business Times reported that the City expected close to $1.5 billion in business taxes in 2019-2020 but ended the fiscal year $228 million under budget.
  • From April to June 2020, revenue from San Francisco’s local sales tax dropped to $30.8 million, a decrease of 43 percent from 2019. Stay-at-home orders resulted in steep declines in brick-and-mortar sales taxes throughout the Bay Area. All of the counties surrounding San Francisco, however, saw increases in online sales taxes while San Francisco registered only a 1 percent increase—the worst showing among California’s 20 largest counties. Speaking to the San Francisco Chronicle, San Francisco Chief Economist Ted Egan attributes the drop in revenue to “tech people moving.”

The city’s near-term economic outlook relies mostly on the decisions [San Francisco’s office industries and their employees] make about the value of their downtown office space.

—San Francisco City Controller’s Office, Five-Year Financial Plan

  • There is a fundamental link between the tech industry and San Francisco restaurants and small businesses, particularly in the City’s downtown. OpenTable data suggests San Francisco restaurant closures are up 35 percent year over year. Laurie Thomas, Executive Director of the Golden Gate Restaurant Association (GGRA), meanwhile, predicts that 85 percent of San Francisco restaurants will close if they don’t receive government aid.

WHY TECH IS LEAVING SAN FRANCISCO

It Costs A LOT to Do Business in San Francisco

Tech executives who consider San Francisco taxes and regulations significant factors in their decisions toward company growth

Source: sf.citi Survey

Most expensive office space market in the United States

Source: Statistica

Business tax increases passed in San Francisco over the last 10 years

  • Despite being heralded as the innovation capital of the world, San Francisco policymakers have spent the last near-decade mounting regulatory barriers against the tech industry. In 2013, San Francisco protested private commuter shuttles. In 2018, San Francisco ordered scooter companies to cease operations. And in 2019, San Francisco attempted to ban corporate cafeterias.

Divisive rhetoric and policies that seek to punish the tech sector and tech workers will only smother San Francisco’s innovation economy and fiscal sustainability for the long term. Now is the time to end the ‘us vs. them’ dynamic and work together to rebuild. San Francisco can be at its best again when we come together to improve our City.

—Ron Conway, Founder of SV Angel and sf.citi Board Chair

  • In 2020 alone, San Francisco passed three substantial tax increases on the tech and business community. These included a “CEO tax” and a gross receipts tax that increases the rate on the tech industry to double that of other comparable cities such as Seattle.
  • San Francisco’s record on taxes reflects a statewide trend. According to the Tax Foundation’s 2021 State Business Tax Climate Index, California’s tax system is ranked the second worst in the country. For corporate taxes, California falls into 28th place, while it lands very near the bottom ranking—49—for individual income taxes.

San Francisco Is the Most Expensive City in the United States

Median home price in San Francisco (highest in the country)

Sources: Zillow

Minimum yearly salary (after taxes) needed to afford a house in San Francisco

San Francisco tech workers who cannot afford to buy a home in San Francisco (82 percent of all San Francisco households cannot afford a home in San Francisco)

Source: Recode

  • Even with rents dropping by more than 20 percent, San Francisco remains the most expensive city in the United States with the median price of a one-bedroom apartment towering above other cities at $2,550/month.
  • A recent study by the AEI Housing Center found that the average tech household can afford a home in 90 of the 100 largest metros in the United States. San Francisco ranked among the six least affordable metros for tech workers, with the average tech household able to afford only 21 percent of available homes in San Francisco in 2019.
  • Between 2010 and 2018, San Francisco produced only one new unit of housing for every 8.5 new jobs. Local zoning restrictions, meanwhile, render the construction of apartments illegal in approximately 75 percent of San Francisco. And San Francisco policymakers have repeatedly opposed measures to upzone, including California Senator Scott Wiener’s landmark housing bill, SB 50, which would have increased housing density around transit corridors throughout California.
  • Prior to the pandemic, the San Francisco Bay Area housing crisis led to a growing number of super-commuters traveling more than 90 minutes to and from work. Between 2009 and 2017, the number of super-commuters in San Francisco County increased by 110 percent with many of the surrounding counties seeing even greater increases.

We wanted to buy a house that we would be happy to live in for decades, and that’s just not possible in the Bay Area, within our budget, even as well-paid professionals.

—Samantha DuPont, Moved to Portland, OR

CLUES ABOUT WHERE TECH IS MOVING