A few days ago, the California Senate approved a bill that prohibits store employees from confronting shoplifters. Meanwhile, Old Navy, headquartered in San Francisco, made an announcement that it will be closing its San Francisco flagship store. This decision follows the footsteps of Walgreens, T-Mobile, Whole Foods, Amazon Go, and Nordstrom, who have also chosen to leave the city. When asked about Old Navy’s departure, the store manager cited the frequent incidents of shoplifting, stating that their store had been targeted at least 1,214 times a day, with 22 incidents occurring in the past two days alone. As a result, downtown San Francisco stores are now counting down the days until their leases expire, after which they plan to relocate. This situation is particularly challenging for both chain stores and small businesses, where the latter have invested their life savings.
Adding to the problem, State Farm, one of California’s largest insurers, recently announced its withdrawal from the entire state for business and property insurance. This decision follows Allstate’s departure six months prior. State Farm attributed its exit to the challenging reinsurance market, which makes it difficult to find insurance coverage for their policies in California. Consequently, thousands of Californians are left without insurance, making it challenging to sell properties since most banks refuse to provide mortgages for uninsurable properties.
In response to these issues, the city of San Francisco launched a flashy $6 million tourism campaign. However, the impact of this campaign was immediately overshadowed as the two largest hotels in the city declared bankruptcy, citing unfavorable “street conditions.” Meanwhile, The Guardian newspaper recently reported on the prevalence of empty skyscrapers in San Francisco, and Market Street, the city’s main commercial area, is filled with signs advertising properties for sale or lease. The office vacancy rate in San Francisco has skyrocketed to 31%, compared to the pre-pandemic rate of 4%. A recent study from Berkeley found that cell phone traffic has decreased by 70% since before the pandemic. It’s important to note that downtown San Francisco contributes 75% of the city’s tax base, almost half of the sales tax, and 95% of the business tax revenue. Therefore, if downtown becomes a deserted area, San Francisco will face severe financial difficulties, leading to potential defunding of the police, regardless of its intentions.
Interestingly, the city’s proposed solution is not to revitalize downtown and bring people back; instead, they plan to convert downtown office buildings into public housing, with over 11,000 units proposed according to one plan. However, this approach may have adverse effects on the downtown tax base. Some local activist groups, such as Shaping San Francisco, even advocate for demolishing skyscrapers entirely, a process they refer to as “deconstruction,” which aligns with their inclination to tear down structures. In a 2021 study conducted by a group of business professors, they predicted a post-COVID urban doom loop for U.S. cities, where businesses leaving would lead to increased crime rates in empty streets and reduced tax revenue, making it challenging to hire an adequate police force to address the situation. Sadly, cities seem to be creating this doom loop themselves, without needing to wait for it.
On a somewhat positive note, urban voters who consistently elect these officials are the first ones to experience the consequences of their choices. Some of them are beginning to awaken from their idealistic notions and are demanding that city officials take action by arresting criminals and eliminating open-air drug markets. However, this awakening is not occurring rapidly enough, as evidenced by recent elections in Chicago and New York. Therefore, we should expect more cities on the brink of decline, more failed businesses, more property market crashes, bankrupt hotels, and, if the trend persists, more cities succumbing to the notion
