Four Ways A Tech Downturn Could Impact SoMa
SoMa is considered ground zero for San Francisco's current tech boom. The neighborhood is home to VC darlings such as Pinterest, LinkedIn and Airbnb. Yet, like all submarkets, SoMa is still subject to market forces and changing trends. Bisnow took a look at four possible changes that could hit SoMa in case of a tech downturn. Want to know more about trends that are shaping development here? Check out Bisnow’s Future of SoMa and Tenderloin event July 13.
The district’s exposure to the tech industry has driven much of the rent growth and economic development. When that particular engine of growth sputters, SoMa will have little to fall back on. It remains to be seen if companies that aren't Y-Combinator darlings can take root here. The slowdown has even drawn comment from Boston Properties CEO Doug Linde, who remarked the market for large office leases outside of Silicon Valley was thinning.
An End To Great Amenities?
Falling valuations force startups to become profitable (or at least EBITDA-positive). Expenditures on discretionary items will be on the chopping block. Will it mean goodbye to beer taps, game rooms and the rest of the things we’ve come to associate with creative office amenities? The implications for physical layouts and character of the real estate could be profound. The district's many bars, restaurants and coffee shops could see a lot more activity from recently deprived techies.
The Fate Of Creative Office
Along with amenities, companies in SoMa care a lot about designing office environments that boost productivity. Tenants tend to favor open working areas and an emphasis on collaboration, according to Kilroy’s Rick Buziak. Will those areas still make sense for startups looking to cut costs through a lower head count? (Or those whose employees just want somewhere quiet to work?) Perhaps downsizing companies will look for co-working space or other types of offices outside of SoMa.
An End To City Hall Support?
San Francisco used incentive programs to draw tech companies to blighted neighborhoods. The city adopted a highly favorable taxing structure to keep Twitter around after the company considered a move to Silicon Valley.
The city has begun drafting an economic resiliency plan in case of a major economic downturn. The details of the plan—including whether those incentives will be maintained—will be released in the coming months.
If incentives disappear, that could result in dramatic relocations that would have consequences for not only SoMa but the entire city.