San Francisco’s Glitzy Hotels Being Shaken by Fiscal Earthquake of Massive Debt
Meanwhile, San Franciscans whistles past the graveyard and pretends it is not in a doom loop.
In 1906, San Francisco was rocked by a massive shift along the San Andreas Fault, which bisects the San Francisco Peninsula just to the west of the city.
Now, the city’s glitzy hotels are being shaken by another earthquake—a fiscal one caused by massive debt.
San Francisco’s hospitality business imploded during the pandemic. Now, its hotel owners are drowning in bad debt as never before.
In the city’s metropolitan area, the delinquency rate among commercial mortgage-backed security loans for the lodging sector skyrocketed to 41.6% in June from 5.7% in June 2023, according to data from real-estate analytics firm Trepp. It is the largest increase across the country’s 25 largest metro areas.
The sharp drop-off in visitors since before the pandemic is squeezing the city’s hospitality sector. Weekend hotel occupancy in June, a rough proxy for leisure travel, is down around 22% since 2019 in the San Francisco-San Mateo region, versus 4% nationwide, according to data firm CoStar Group.
Of course, “quality of life” concerns are not making the city more appealing to people…as well as that Big Tech giants like Musk’s X are leaving the area.
Open air drug markets, a growing homeless population, and increased crime has left many San Francisco neighborhoods in turmoil.
Compounding the issue is a strong dollar, which is encouraging more Americans to travel abroad.
Meanwhile, Chinese tourists, a major source of visitors, are deterred by the strong dollar and economic uncertainty.
…Visitor numbers have also been hit by the decision of tech companies like Google and Meta to move out of the Moscone Center, its main convention center.
Business travelers would often extend their trips for a few days to enjoy the Bay Area at leisure, but conferences have now shifted to areas such as Las Vegas instead.
Now, the city travel association expects 26 percent fewer events and 31 percent fewer room-nights from those events at the Moscone Center this year compared with last.
To turn things around, the city offers “free rent” to businesses.
Under the program, city and business leaders provide free rent for up to six months, as well as other funding for business expenses and incentives like technical and business permit assistance, to entrepreneurs who want to set up shop in empty spaces, many of which are on the ground floor of office buildings.
The hope is that these pop-up operations will pay rent and sign longer leases after the free-rent period is over, and that their presence will regenerate foot traffic in the area.
Some 850 entrepreneurs initially applied for a slot, and 17 businesses were chosen to occupy nine storefront spaces last fall. Out of those businesses, seven extended their leases and now pay rent. Eleven businesses were selected in May for the program’s second cohort, which started operating their storefronts this summer.
I have to say, those statistics are less than impressive. Furthermore, I imagine that a city that has poop maps gives free beer and vodka shots to the homeless, celebrates open-air drug markets, and has more drug addicts than high school students, is not at the top of most people’s vacation list.
Meanwhile, San Franciscans whistle past the graveyard and pretend it is not in a doom loop.
One year after San Francisco was introduced to the concept of a “doom loop,” in which fears of a remote-work-fueled real estate “apocalypse” would trigger mass tax shortfalls, budget cuts and out-migration, the city has yet to spiral into the worst-case scenario, experts say.
But the recovery remains very shaky, with the city cutting spending as it grapples with a budget deficit that could reach a staggering $1.36 billion by 2027 — the equivalent of nearly 10% of this year’s total budget.
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The califreakia death spiral continues.
https://images.app.goo.gl/WysAGZgPwJmgUBzE9
“To turn things around, the city offers “free rent” to businesses.”
TNSTAAFL. Anyone who has spent more than an hour in an economics class can tell you that.
Notice that there’s no mention of restoring social order – clear out homeless encampments, arrest drug dealers and users, enforce basic decency in public (you know what I mean).
Progressives were so pleased with all of the hIStoRiC fiRsTS of electing a homosexual mayor a generation ago. It’s pretty clear that the gay culture of San Francisco has had disastrous (but not surprising) consequences for a once beautiful city.
I don’t believe SF has ever had openly gay mayor. You might be thinking of harvey milk, or other members of Board of Supervisors. Houston was the first major city with gay mayor.
SF has wrecked itself
Coming to a city near you. San Francisco is a the canary in the coal mine because…well, California. But, commercial real estate delinquencies are rising across the country. Office space delinquencies are being impacted especially hard. I suspect multi-family mortgages (apartment buildings) have only been spared (for now) because of our immigration-produced housing shortage that has artificially inflated demand.
https://www.statista.com/statistics/1200066/commercial-mortgage-backed-securities-delinquency-rate-usa/
A member of my extended family works at a large multi-national bank in their commercial real estate business in Chicago. According to him, the business these days is in much worse shape than the statistics suggest.
Gotta love those socialist utopias!! They never fail to fail.
Now look at Chicago and NYC. Will LA still be standing for the next Wokeolympics?
Thunderdomes aren’t that expensive to construct.
I’ve stayed at both the Parc55 and the Hilton near the Moscone Center. Last time was in 2022 for a medical convention — as the photos in the Daily Mail yesterday accurately describe, there were homeless people (a.k.a. bums, hobos, drifters, winos, druggies, crazies) squatting (literally and figuratively) in the outdoor window nooks next to the parking garage of the Hilton. The hotel had installed chains and fencing at some locations — not an attractive look for all that sleek granite. I said then that that was my last convention at SF, and I think my organization got the same idea.
The hilton at oakland airport is shutting down. There is no way to stop the constant car break-ins. Hotel guests keep getting their luggage stolen.
“homeless people (a.k.a. bums, hobos, drifters, winos, druggies, crazies) squatting (literally and figuratively) in the outdoor window nooks next to the parking garage of the Hilton. The hotel had installed chains and fencing at some locations — not an attractive look for all that sleek granite.”
Dummies! You’re supposed to mount them on the eaves!
its ok
like most everything else in ameica now
its GOVERNMENT OWNED
so just turn over more power to the mafia…government
and continue on
I say open the doors to the homeless and bill the feds
Usually works!!!
Even the dogs are fearful of stepping in human poop on the streets.
Shithole
This is much worse than that.
The sales and income tax revenue that sits on top of these commercial entities is (in combination to the top 5% of earners) is what pays for California’s socialism.
The business tax revenue is gone.
The top earners are gone.
Ca is out of “other people’s money” to spend on socialism.
This is why Newsome is trying to crack down on homelessness. He’s a terrible administrator and even worse governor- so he will of course fail wildly.
The only thing that can save the City by the Bay is “The Big One” which, aside from the death and destruction, would result in a huge infusion of Federal money for recovery.
Free rent for six months. Yeah but no. That rent is being paid by someone and it’s the few taxpayers that can’t Escape From San Francisco
Six months is long enough to pull most “long cons.”
After that, you’ll be somewhere else.
A “doom loop” seems inevitable, with over 40% delinquency rates on mortgage loans. The building valuations are likely quite excessive for property tax purposes and major cuts are likely unavoidable. Property taxes themselves account for 1/3 of SF revenue. Business tax revenue, accounting for nearly 1/6, also has to be dropping.
I went to a conference at the San Fransisco Union Square Hilton in May, my first trip to California. Certainly I was aware of the media image California had, but I never fathomed it would actually be that bad.
Living in Ithaca, NY, and having spent time in the City, I am no stranger to the homeless. But it’s on a whole other level in San Fransisco. Tent villages lined up for blocks. Completely open drug use and prostitution.
I took a client out for lunch and, on our way back to the hotel, found a street on our journey blocked by police. A homeless man stumbled across the hot pavement, disheveled, pants dragging on his ankles. He walked up to his audience of onlookers, dropped his pants down the remaining few inches of his legs, and took a shit right in front of us.
The scale of homelessness is on another level, but it’s the aggressiveness and indifference that really shocks you. Neither the approach to homeless encampments in Ithaca or San Fransisco are compassionate. But in Ithaca, it’s hidden behind “The Jungle”, deep in the drained swamps of the city. New York City and Philadelphia is more out in the open of course, but the dilapidation in these areas has long ago occurred. In San Fransisco, it’s almost everywhere, both inescapable and spreading.
On a related note, Republicans need to stay on message and talk about Harris, not Walz. Voters don’t care so much about the Vice President. When Walz is accused of being a liberal or lefty, politicos listen and Harris’s radical base is solidified but no one else pays much attention. Harris is literally cut from the cloth that contributed to the tragic human rights violations and collapse of society in San Fransisco. It might be too late to convince voters that Harris is responsible for the state of inflation and the economy although there are significant, highly convincing arguments that she is, since she cast the tie breaking votes for bills such as the Inflation Reduction Act. But I don’t yet see Republicans nailing her to this cross, and I don’t see voters definitively making the connection between the IRA and inflation.
So because Harris’s record and history are relatively unknown to voters, does it make more sense to tie these abject failures and human rights abuses to her record in California?