A report from San Francisco Chief Economist Ted Egan estimated that the city could lose close to $200M in property tax revenue by the year 2028 under a worst-case scenario resulting from the city’s high office vacancy rates.

During a presentation to the city’s Board of Supervisors, Egan estimated that under the worst possible conditions, the city’s office vacancy could rise to 31% by the end of next year, Bloomberg reported.

Subsequently, commercial property values would fall, netting less property tax revenue, though this is potentially somewhat offset by a combination of long-term leases, and California Proposition 13, which leads to valuations for the purposes of property tax frequently falling below market-rate, potentially softening any economic downturn.

“However, if office demand is permanently reduced by remote work, eventually the city will see sizable reductions in property tax revenue from offices,” Egan warned in the report, according to Bloomberg.

San Francisco is expected to collect $2.38B in property taxes for this fiscal year, according to a budget proposal discussion from the city published earlier this year.

Egan noted that in San Francisco, the tech industry’s ubiquity has created a kind of symbiotic relationship with other industries, such as finance or professional services.

“Finance has been OK, but it's slowing. And I think professional services is too. But you know, that's a nexus of activities that's really led by tech. It's generated the demand for a lot of the financial services. So, we have seen, I think nationally, other office using industries be more return-to-office focused than tech has. But I don't think the dynamics of those industries in San Francisco are sort of separate from tech. Know what I mean? They're not going to grow if tech is going down,” Egan told Bisnow last week.

The city’s tech segment has seen major job displacement this year, with several thousand layoffs occurring in a relatively short period of time. Major tech employers in the Bay Area such as Meta and Cisco have hemorrhaged staff in recent weeks.

An October report from Egan, The Status of Re-Opening of the San Francisco Economy, noted that the city’s office vacancy rate rose to 24% in the third quarter, lagging behind most other metros in the country.