Pandemic has companies rethinking the need for sprawling office space

SAN FRANCISCO - San Francisco saw signs of workers returning from a pandemic year of remote work to their downtown office buildings. 

Salesforce welcomed a portion of employees back to the Salesforce Tower south of market. Restaurants and small businesses are beginning to see lunch- and after work- crowds slowly come back.

The pandemic, however, has many companies re-thinking the need for sprawling office spaces and the costs of commercial leases.

Salesforce is reportedly allowing some two-thirds of workers to remain home and has canceled a lease for space in a proposed new building at the Salesforce Tower site.

It is one of many tech companies downsizing.

Airbnb announced this week it is looking to decrease its office space in the South of Market area. That comes as Twitter on Market Street is looking to sub-lease more than 100,000 square feet of space. Pinterest also is pulling back the reins and canceled a lease for a reported 490,000 square feet in a proposed building downtown.

"One thing that's certainly happening is companies are using less space," said Bay Area Council President and CEO Jim Wunderman, "There's a lot of vacancy, especially in San Francisco, close to 20 million square feet which is which is a lot, and they'll probably be more that comes on the market, so this probably won't be the last we'll see."

Wunderman says companies are recalibrating workflow with the pandemic's remote work-from-home model.

"A lot of companies are going to bend the curve and have people work in a hybrid fashion so sometimes at home or remotely and sometimes in the office, and then sort of play to wait to play a wait-and-see game. See how that goes. But I suspect the trend is going to be more to getting people back together than it is to have people work remotely over time because I suspect companies will be more productive and effective and innovative with their people together," sad Wunderman.

It could take months or years for businesses to settle on a post-pandemic work model. As it is sorted out, fewer office workers could cause a major shakeup in what the downtown landscape looks like.

Robbie Silver, executive director of the Downtown Community Benefit District, says businesses that depend on office workers are hoping that next month's June 15th reopening of California will help bring more people back downtown.

"Traditionally downtown San Francisco has catered to the 9 to 5 crowd," said Silver, "Our restaurants need people to come back. Our retail needs people to come back."

Wunderman anticipates demand for San Francisco office space will bounce back, with new companies finding opportunities as current companies downsize. He says the region has some 157 private companies or so-called unicorns, valued above 1-billion dollars and

there is a lot of the real estate activity around the biosciences area, which he expects to continue to grow. Wunderman says commercial real estate brokers are not dropping prices much.

"So, I think there's a lot of anticipation in the commercial real estate market that companies are going to start coming in," said Wunderman.

Some say downtown San Francisco might need some permanent post-pandemic changes that replace massive office space with other uses.

"There is a proposed plan at 530 Sansome to actually revitalize that corner as well as the adjacent fire station, and the proposed plan that I've seen has actually...a proposed mixed-use development where you have a hotel, gym, restaurant space and even public safety, all living under one house," said Silver, "I think those types of development opportunities are really good here in downtown San Francisco.

"We're really poised to become a 24 hour downtown where you have a healthy mixed-use environment, people living in the urbanized downtown core, and playing in the urbanized downtown core as well," said Silver.

Jana Katsuyama is a reporter for KTVU.  Email Jana at jana.katsuyama@fox.com and follow her on Twitter @JanaKTVU or Facebook @NewsJana or ktvu.com.