San Francisco’s Economic Recovery: Reimagining Downtown

After a once-in-a-century pandemic that significantly impacted our Downtown and emptied office buildings to record levels, Mayor Breed created a vision to reimagine San Francisco’s economic engine. The goal: for San Francisco to emerge stronger and more resilient for future generations. This plan set a vision to transform Downtown into an area that meets the current and future needs of our workforce and residents while investing in creative solutions that will make it a vibrant destination for all San Franciscans.

Mayor Breed’s Roadmap to San Francisco’s Future created the vision to transform Downtown into “everyone’s neighborhood.” It is and will continue to be a thriving and economically diverse urban center that is active at all hours, connected by a world-class transportation network and supported by a safe, clean, and welcoming public environment. In Union Square and Yerba Buena, the focus is on adding new experiences, strengthening destination retail, bolstering tourist activity, and expanding uses on upper floors to ensure a vibrant neighborhood for San Franciscans and visitors alike. It means creating more homes and new higher education institutions under Mayor Breed’s 30x30 Plan, a bold vision to bring 30,000 new residents and students to Downtown by 2030.

However, revitalizing Downtown also requires attracting new talent and businesses to support economic growth and ensuring that the City continues to be the innovative hub that San Francisco is known as across the world. Under Mayor Breed’s leadership, the City has already made progress in meeting the goals laid out in the Roadmap to San Francisco’s Future. Mayor Breed has amended zoning and changed laws to streamline the conversion of underutilized office space into housing to help increase the City’s overall housing supply. Mayor Breed has established office tax credits and implemented business tax reforms, attracting new and existing businesses Downtown.

San Francisco continues to lead as a global innovation and investment hub. In 2023, Mayor Breed declared San Francisco the AI Capital of the World. The City is home to 20% of all AI jobs in the United States, with 8 of the top 20 generative AI firms located within city limits. Since 2023, nearly 5 million square feet of new office space in the City was leased by AI companies — 70% of the companies that have signed leases are NEW to SF. San Francisco represents the largest VC market in the world, with firms raising $34.3 billion in 2023. Companies headquartered in the City received more VC investment than any U.S. state.

The City has worked to bolster the tourism industry that is a major driver of our economic engine. Mayor Breed’s investments and her travel to tourism destinations across the country, in Europe and in China has yielded new connections and helped to bolster San Francisco’s reputation as an iconic city. As of September 2024, international travel at SFO is 103% of 2019 level.

Tourism generated $609.6 million in tax revenue for the city, an increase of more than $87 million compared to 2022. The visitor economy also helped support nearly 63,000 jobs in San Francisco, up 18%. According to the Bureau of Labor Statistics, the leisure & hospitality industry was the second-largest source of employment in San Francisco in Q3 2023.

International visitation continued to be a key driver in San Francisco’s tourism recovery, growing by 26% in 2023. Over two million international visitors contributed $4.64 billion in visitor spending. San Francisco attracted 23.1 million visitors in 2023, a 5.2% year-over-year increase. Visitor spending grew by 18% to $8.8 billion. Total 2023 visitor-related spending, including $494.6 million in meeting planner and exhibitor spending, increased by 20% to $9.3 billion.

Downtown San Francisco has so many advantages: a beautiful waterfront location; robust transit; a dense, walkable neighborhood; restaurants, bars, and entertainment; access to iconic venues like Chase Center and Oracle Park; more deployable capital than anywhere in the United States; unparalleled talent; and a culture where we dream the next great idea that will change the world. That said, reimagining Downtown does not mean doubling down on the mistakes of the past. It means investing in a vision that meets the workforce, housing, educational, travel, and creative needs of all those who live and visit San Francisco.

ROADMAP TO SAN FRANCISCO’S FUTURE

In response to the profound economic changes brought on by the pandemic, Mayor Breed launched a Roadmap to San Francisco’s Future, a comprehensive plan to reinvigorate downtown and reaffirm San Francisco as a thriving global destination and the Bay Area’s economic center. The Roadmap’s nine core strategies respond to emerging economic trends and capitalize on the City’s strengths by investing in key priority areas such as public safety, clean streets, workforce and business development, arts and culture and transportation.

DELIVERING TAX REFORMS

Mayor Breed has delivered major tax reforms to help San Francisco become a more competitive city for innovation and investment, while still continuing to have the revenue necessary to deliver critical services. Under Mayor Breed, San Francisco has cut administrative processes and burdensome taxes that created barriers and disincentives for small, retail, hospitality and several other businesses to operate Downtown.

In 2023, Mayor Breed launched a collaborative, comprehensive effort to reform the City’s business taxes. In November 2024, the voters approved Prop M, a comprehensive tax reform measure that:

• Exempts more than 2,500 small businesses from the tax by expanding the Small Business Exemption to $5 million dollars.
• Lowers taxes for hotels, arts, entertainment, and recreation.
• Reduces volatility by ensuring taxes are not over concentrated.
• Reduces disincentives for bringing workers back or locating in San Francisco.
• Simplifies the overall tax structure to be more predictable.

These reforms followed on other key tax measures Mayor Breed has taken during her time in office, including:

• Delaying scheduled tax increases during the post-pandemic recovery to protect existing businesses.
• Offering incentives to new businesses locating in San Francisco for up to three years to recruit new businesses.

OFFICE TO HOUSING

Creating more housing Downtown supports making the neighborhood more active and vibrant, as well as helping San Francisco to meet its housing goals. But working with building owners and developers, City staff learned that there were significant costs and legal barriers, even in buildings where these projects were physically feasible. To convert more empty office space to housing, Mayor Breed led an effort to remove barriers and eliminate fees to make these projects more feasible. This includes:

• Removing Barriers: Passed laws to remove unnecessary Planning Code requirements that apply to housing that got in the way of conversion projects.
• Waiving Fees for Conversions: Mayor Breed proposed the elimination of inclusionary housing fees and impact fees from office to housing conversions.
• Eliminating Transfer Tax: Mayor Breed authored a ballot measure approved by the voters in March 2024 to waive the real estate transfer tax for office to housing conversions.

ATTRACTING NEW BUSINESS DOWNTOWN

New Leases: San Francisco continues to see more companies investing in Downtown’s future by signing new office leases or renewing existing ones, led by the Artificial Intelligence industry, which is projected to add 12 million square feet of office space by 2030. Additionally, tenant demand for office space reached 6 million square feet in the first quarter of 2024, a significant increase from the 4.2 million square feet of demand at the end of last year.

AI-related office leases:

• OpenAI, 792,000 square feet in Mission Bay
• Anthropic, 230,000 square feet in the Financial District
• ScaleAI, 178,000 square feet in Mission Bay

Of the Forbes 2024 Top 50 Artificial Intelligence List, 21 of the top 50 firms are located in San Francisco. Those 21 firms have raised an estimated $22.4 billion in funding.

• In 2023, San Francisco companies received $34.3 billion in funding, which is approximately 20% of total U.S. Venture Capital (VC) investment.
• San Francisco received more VC investment than any state in the country, excluding California.
• In 2023, generative AI companies headquartered in San Francisco captured over 70 percent of global VC funding for the industry that year. This strength is driven by firms like OpenAI and Anthropic, which closed major rounds of funding last year.

Maintaining and Growing San Francisco Businesses

Under Mayor Breed’s tenure, Visa committed long-term to San Francisco at its new office in Mission Bay, Autodesk moved their headquarters to San Francisco, and VIR biotechnology located here. Mayor Breed recruited Ingka to buy the Ikea building and open Ikea and she recruited Hmart to SF. She also worked to maintain long-time tech leaders to stay like Airbnb to stay.

RETAIL

The pandemic heightened and accelerated many pre-pandemic trends, including the changing nature of retail and a shift to online shopping. These ongoing changes, combined with hybrid work, suburban competition, and a protracted recovery in tourism, impacted the number of workers and visitors Downtown, leading to storefront vacancies and declining foot traffic. Mayor Breed’s policies focused on creating more flexibility for local retailers, promoting a safe and vibrant experience, and welcoming people to Downtown.

• More Flexibility: To help fill vacant ground floor spaces and underutilized buildings in the Downtown and Union Square areas, Mayor Breed changed zoning laws to diversify the mix of businesses and activities and simplified the approval process and requirements for converting existing commercial buildings into housing.
• HEART Plan: Mayor Breed funded an action plan in the Union Square and Yerba Buena Districts as part of her plan to revitalize the hospitality, entertainment, arts and culture, retail, and tourism areas (HEART) of Downtown. The comprehensive plan reimagines Powell Street, creates more Entertainment Zones, invests in public spaces like Union Square Park, expands small business and vacant storefront support, provides more support for safety programs, and expands efforts to fill empty space with flexible uses.
• Safe Shopper: Under this program, the San Francisco Police Department (SFPD) deployed additional police and community ambassadors to the Union Square areas during the holiday seasons to enhance public safety and maintain a safe shopping experience for visitors, workers, and residents. This strategy helped lead to significant reductions in crime in the Union Square area after a series of high-profile incidents in 2021.
• Ambassador Expansion: To support Police Officers in their work and to make people feel more welcomed, Mayor Breed led the largest expansion of street ambassadors and attendants in recent history. These included Mid-Market/Tenderloin Safety Ambassadors, orange jacketed SF Welcome Ambassadors, BART service attendants, and SFPD Community Ambassadors, which are retired police officers that serve in a supportive role to offer an added layer of safety.

Vacant to Vibrant: To drive interest and recruit more businesses, Mayor Breed launched the Vacant to Vibrant Programs, a partnership with OEWD and SF New Deal designed to help small businesses, entrepreneurs, artists, and cultural organizations activate vacant storefronts Downtown.

• The initiative provides awardees with free rent and support to open and operate a pop-up business in a location Downtown. This includes permit navigation support, outreach, matchmaking, lease negotiations, insurance, and marketing services.
• Each recipient is awarded grants to help with set-up and operating costs, while property owners are awarded grants to cover utilities and tenant improvements.
• The program was a major success: 89% of initial businesses were granted lease extensions, proving that an initial investment can help create long-term benefit for the City.

ECONOMIC RECRUITMENT TRIPS: EUROPE AND CHINA

The pandemic prevents Mayor Breed from conducting significant travel during a large portion of her time as Mayor. She took two major international trips to bolster tourism and strengthen economic and diplomatic ties.

In the spring of 2022, she flew to Europe to support bringing international travel back to San Francisco. The Mayor visited London, Brussels, Frankfurt, and Paris, where she met with airlines, airports, and local leaders to both continue and expand partnerships to reestablish San Francisco International Airport as the international gateway to California and a hub for European markets, and to bring tourists back to San Francisco. These meetings yielded major benefits, including new airlines and flights coming to San Francisco, which provides millions of dollars in economic activity and creates hundreds of jobs at the airport and regionally.

In April 2024, Mayor Breed led a delegation of business and community partners and API leaders to China on the invitation of President Xi following the success of APEC in San Francisco in 2023. More than 20 heads of state from Asia and Europe, global leaders and thousands of global CEOs convened in San Francisco.

The Mayor visited Shenzhen, Guangzhou, Beijing and Shanghai where she met with Mayors of each city, as well as business and tourism leaders. Tourism and economic development were key objectives for the Mayor’s trip, including bringing more Chinese airlines and routes to/from China and SFO and building on China’s people to people exchange which includes academic exchanges and expanding universities in both countries. Additionally, the marquee of the trip was Mayor Breed’s commitment to secure Giant Pandas from China to be leased for the San Francisco Zoo. The SF Zoo has never officially hosted Giant Pandas to date.

30X30

Mayor Breed set a bold goal to bring at least 30,000 new residents and students downtown by 2030. This vision sees downtown as a diverse, mixed-use, 24/7 destination and neighborhood. This plan was set on four strategies:

• Convert at least 5 million square feet of office space to approximately 5,000 units of housing. These units would welcome some 10,000 new residents to downtown’s historic office core.
• Build 5,000 new units of housing to welcome another 10,000 residents across downtown neighborhoods. Steps towards this goal include:
• Bring 10,000 students, teachers, and staff by attracting universities and colleges to locate or grow their presence downtown.
• Transform Downtown’s public realm to serve its future as a mixed-use neighborhood, with outdoor spaces that serve all of its future users.

Making Downtown and SF Fun

Downtown San Francisco has historically been a lot of things, but fun was not necessarily one of them. To bring more people to San Francisco and to bring joy to the city and its residents, Mayor Breed launched an effort to transform Downtown not just a place where people come to work, but where they come to play. This includes changing state and local laws to allow for more entertainment uses, investing in festivals and street fairs, and creating more exciting and vibrant public spaces.

• Entertainment Zones: Mayor Breed worked with State Senator Scott Wiener to change state laws to allow for the creation of “Entertainment Zones,” where restaurants and bars can sell alcoholic beverages during outdoor events and activations. After successfully passing state law, Mayor Breed quickly passed local legislation to create the first Entertainment Zones in the state of California, right in the heart of Downtown. Building on the success of this first Entertainment Zone, Mayor Breed expanded it to more areas of the City, including by Chase Center, Mid-Market, and Union Square.
• Entertainment & Nightlife Revitalization Grant: Mayor Breed worked with OEWD and SF New Deal to launch the Downtown ENRG (Entertainment & Nightlife Revitalization Grant) Program, a program that provided up to $50,000 to fund new economic revitalization projects to support new activities, events, and campaigns to attract patrons and increase Downtown activity.
• SF Live Concert Series: In April 2024, Mayor Breed announced the City’s new SF Live Concert Series, which activates the Golden Gate Park Bandshell, Fulton Plaza, Union Square, and the Jerry Garcia Amphitheater for live concert series through November.
• Public Spaces: Mayor Breed has made direct investments in public spaces like the Landing at Leidesdorff, Mechanics Monument Plaza, Union Square, Hallidie Plaza, Powell Street, and a new skate park at UN Plaza to create new and inviting experiences Downtown.