How San Francisco Will Reinvent Itself by 2035

San Francisco's in the midst of an absolutely epic comeback from the doldrums of the pandemic. After a population exodus, falling real estate valuations, and declining street conditions, the city is poised for major growth in the coming years. Home prices and rents are once again climbing at among the fastest rates in the entire country. Office vacancies are falling, retail vacancies are falling, crime is at multi-decade lows, conventions and tourism are back, all because of tremendous work by and cooperation between public and private actors that are reinvesting in the city Flipping the narrative and ushering it into its next growth phase. This is Austin Klar, your lawyer turned real estate agent in San Francisco. And in this video, I'm breaking down how the city is reinventing itself and flipping the pandemic-era narrative on its head from doom loop to boom loop. I'm breaking down specific policies that have been implemented by both public and private actors that are changing how office vacancies, retail vacancies, and our housing market are going in the city. I'm also addressing how the city's dealing with some of the potential drawbacks of renewed population growth and rising real estate valuations. So let's get right to it and level set with what went wrong in San Francisco during and immediately after the pandemic. The advent of remote work and resulting decline in street conditions completely cratered San Francisco during and immediately following the pandemic. Downtown San Francisco had historically been the economic center for the entire Bay Area, and before COVID nearly half a million people commuted downtown every single day, and that drove a ton of business and economic activity for the city. That all turned on a dime once the pandemic hit. Office vacancies soared past 38%. Bar and Muni ridership cratered. The number of people crossing the bridge paying tolls to get into San Francisco cratered, and that really hurt San Francisco's economy. Storefronts got hammered because there were vastly fewer people visiting those storefronts, trafficking those streets every single day. By Q1 of 2024, Union Square, which is like the retail hub of the city, hit over 20% retail vacancy, and the citywide retail vacancy had reached almost 8%, which was way higher than the national average. National chains and small businesses alike pulled out of the city at a very rapid pace. And And with vacant buildings and storefronts and decreased foot traffic, crime and homelessness surged. And because of these declining conditions, general demand for real estate in San Francisco declined as well, and that caused home prices and rents to fall. Luckily, after years of hard work, all of the things that were trending in the wrong direction for San Francisco for so many years are now starting to trend back in the right direction. Office vacancies are falling, retail vacancies are falling, conventions and tourism are up. Crime and homelessness are falling, and home prices and rents are back on the upswing again. I've got a separate video diving into the data on all of those so you can see that it's not just rhetoric, it's actually happening. I'll link that in the description below if you want to go check it out. But what I want to focus on for the rest of this video is what San Francisco is actually doing to facilitate this, what policies are being implemented or practices being implemented that are driving these positive changes that we're seeing. Before I dive into it, if you do me a huge favor, if you like videos about San Francisco's lifestyle, different neighborhoods, real estate, current events, new developments, or its incredible history, subscribe to my channel because I make videos about that stuff every single week. And if you're thinking about relocating and want to understand how all the changes we're seeing are impacting various sectors of our real estate market, reach out to me. I was a lawyer at one of the biggest law firms in the world before getting into real estate, and I've helped numerous people relocate here from all over the country. Be happy to be a resource for you. I'll put my contact info in the description below. Reach out anytime. Now back to how San Francisco is reinventing itself, and the general thesis is driving people back to the city, make it more desirable for companies to be here, make it more desirable for people to be here setting aside their work, and make it more affordable for these new residents to be here as well. So what has the city done and continuing to do to accomplish these goals? Well, the biggest focus has been on revitalizing downtown specifically. The exodus of companies and retail was felt far and away the most in downtown San Francisco. So the largest push, at least from the city's perspective, has been to get downtown back on track. Downtown San Francisco. More foot traffic, more workers, improve overall street conditions. So what specifically have they done to accomplish that? Well, there are a number of things that the city's done to make it more attractive recreationally and for businesses. First one I want to talk about is implementation of what are called entertainment zones and First Thursdays. The city has enacted a series of laws creating spaces that are called entertainment zones, basically designated parts of downtown where outdoor drinking or the sale of alcohol is allowed. In conjunction with those, the city hosts free monthly events called Downtown First Thursdays. The the first Thursday of every single month, the city sponsors an event along with local businesses, free concerts or holiday-themed parties for like Halloween or St. Patrick's Day. And these events bring literally tens of thousands of people to downtown. So the local businesses that sponsor these events, as a result of that, see huge upticks in sales. So there are big benefits once again because of all this foot traffic for being a restaurant, for being a small business in downtown, even aside from, you know, being a specific sponsor of one of these events. Another program implemented is what's called the Vacant to Vibrant program, and that's to drive new retail and food experiences to our downtown spaces. Under the program, local businesses are provided 3 months of free rent from grants by a nonprofit called the SF New Deal. That program helps these businesses with permitting and grants to cover business expenses in that period. So the goal is to basically encourage these businesses to experiment with new locations they might not otherwise have considered and new audiences they wouldn't otherwise be reaching. while also catering to existing clientele in the city. The first iteration of pop-ups opened in the Financial District and in SoMa, and it became clear pretty quickly that the program was successful. The whole point is to provide a bridge for temporary pop-ups to then become permanent staples of that location, and the program has been very successful. 7 of the first 9 that did this program actually transitioned into long-term permanent leases, and overall there's been 38 pop-ups, 27 of which have been in downtown specifically. And it's been so successful that it has extended beyond the Financial District and SoMa into places like Union Square and the Powell Street Corridor. New storefronts are planned for the Powell Street Corridor and throughout the rest of downtown, with millions of dollars in funding from the mayor's office and the Office of Economic and Workforce Development. And it's super popular— over 1,200 businesses have applied for these grants. And all of these pop-ups that are getting to take advantage of the program are seeing all the benefits from all the other new retail and restaurant experiences that are moving into these areas. The RealReal, for example, which left during the pandemic is moving back into the space that it vacated. AT&T is doing the same thing, and there are a ton of other ultra-luxury retailers in the area that have expanded or opened new stores specifically in and around Union Square. So downtown vacancies and Union Square vacancies in particular are starting to get back on track, and all the other businesses who have stuck around or opened up, you know, during that time frame are seeing the benefit. San Francisco has also partnered with Biedermann Redevelopment Ventures to reinvigorate Union Square specifically. BRV is the same group that transformed Bryant Park in New York City from a crime-ridden space into one of the most beloved parks in the entire country. In late 2024, Mayor London Breed announced that BRV would lead more than 200 days of free programming in Union Square in 2025. Things like yoga and tai chi classes, other fitness classes, arts and crafts, live music, cultural events, you name it, they were hosting it for free in Union Square. The idea was to make Union Square an everyday destination, not just a place where you go when you need to go to a store specifically. If you're a local or if you're visiting, there other things for you to do in Union Square. And that program has been so successful that it's been extended through summer of 2027. During the initial, you know, phase of that program, it has served around 800,000 participants. So it has had massive success, so much so that they've renewed the agreement and extended free programming through summer of 2027. San Francisco has also overhauled its permitting and inspection processes to make it easier for small businesses to operate and to reutilize underutilized spaces. They've streamlined the health inspection process. They've made it easier for restaurants to get permits to operate outdoor space. They've expanded permit exemptions for equipment upgrades, and they've established firm time limits on how long the city has to grant or deny specific permits. So people are no longer left kind of waiting in permit purgatory. Small business is one of the backbones of San Francisco's economy. So just making it easier for them to set up shop and to operate their business is huge for the economy. And none of these changes making it easier or more attractive for businesses to operate and open up shop would really matter if street conditions were uninhabitable. After getting a bit out of control, crime is back down to multi-decade lows. Increased police presence and willingness to enforce laws and investigate crime has actually, go figure, made major strides in reducing crime. You can look at the San Francisco Crime Dashboard and filter by crime type and by geography to see the breakdowns across San Francisco. It's not just rhetoric. The data backs it up and it's all publicly verifiable. There's still work to do for sure, but a lot of progress has been made thanks to things like new drone surveillance programs which have been used to, you know, catch criminals, you know, go on chases after criminals try and get away. For example, San Francisco has also walked back a lot of its relaxed enforcement policies as well. Unsheltered homelessness has also fallen. There's been a big push to open new rehabilitation centers and focus on finding permanent placement for people in temporary shelters so that they don't just end up back on the street. Again, a ton of work left to do, but there is improvement, and we're seeing it demonstrably, you know, physically on our streets. And as much as this is helping reinvent the city itself, it's also changing the way that the world perceives San Francisco. Perception is reality. And the Super Bowl, which just happened in February, is the best example of that. You had several public figureheads who had, you know, not been to the city in many years, or some come to the city for the first time, and seeing firsthand that San Francisco, what they see in real life, doesn't match the narrative that being portrayed on the internet about the city at all. The reality is, for the most part, San Francisco is a pretty awesome place. Of course, like any major city, it has some drawbacks, but overall it's a great place to live. And they were now publicly touting that, when as before they were just hearing negative things online and going with it. And these positive changes and positive, you know, perception changes are having demonstrable impacts on our commercial and residential real estate markets. Downtown once again is becoming a more desirable place to spend time, not just because of work, but for recreation as well. And that overall more desirable environment is spurring a resurgence in return to office. As of Q4 2025, according to CBRE, office vacancy rate fell by 3.7% in 2025, the largest annual decrease since 2011. After cresting 38%, it's now at 32.8%, with some parts of the city like Mission Bay, for example, which has been a hub for major AI leases, at significantly lower vacancy rates. Leasing activity and overall demand levels for office space are back to pre-pandemic levels. Anthropic just leased an entire 400,000 square foot space in SoMa. It's a massive lease, and it's one of many huge leases by AI companies. The renovated Transamerica is garnering record rents for office space in the city, and it's actually being sold to new buyers after the developer rehabilitated and stabilized the building. And these companies that are leasing and building out these nice new shiny office spaces, no surprise, are demanding that their employees use it. They're demanding that their employees come back to the office. So that's bringing foot traffic traffic back to downtown, back to BART, back to Muni, back to the Bay Bridge and the Golden Gate Bridge. So we're getting those bridge tolls again to help, you know, plug the budget deficit. And return to office and the overall, you know, improving city conditions are once again driving renewed population growth back in San Francisco. People are coming back not just for work, but because San Francisco is just a great place to be. Unfortunately, though, that's putting a very heavy strain on an already constrained residential real estate market. San Francisco is experiencing the fastest rent growth of any major city city in the entire country. In 2024, over 80,000 people applied for just 512 available affordable housing units, and both condos and single-family homes are experiencing renewed price appreciation as conditions improve. Demand for housing regains steam as the AI boom booms, and we have a massive influx of new capital from venture capital investment in companies in the city. I've got a separate video diving into all of that extreme price growth that we're seeing. I'll link that in the description below. You can go check it out. But for purposes of this video, I want to focus on what the city is doing to help alleviate and address that extreme price growth. Not everything is within the city's control. Obviously, they can't control interest rates, they can't control the financial markets, they can't control the cost of construction. But what they can do is break down kind of administrative and legal barriers to development that hopefully spurs more development and makes it more financially feasible. And one of those things is the so-called family zoning plan. This is something that the city had to enact in order to stay compliant with the California housing mandate. Uh, I go over it in a lot more detail in in a separate video, which I'll link in the description below. But for purposes of this video, the long and short is it basically makes it lawful and permissible to build a lot more units than were previously allowed under San Francisco's prior zoning ordinances. And there are 4 major overarching goals of this massive rezoning effort. First, it's increasing density in areas that were previously locked into single-family zoning, like, you know, West Portal and the Richmond and Sunset and parts of North San Francisco as well. They also increased height limits along key transit corridors. So, you know, there's more dense housing allowed around other retail spaces or along, you know, key like BART or Muni lines, for example. The program also loosened density restrictions for small lot splits, ADUs, and creating, you know, backyard granny flats or cottages. And they've expanded where mixed-use housing can be built on, you know, underutilized commercial land. Think things like old parking lots or car dealerships or like former warehousing space that isn't really utilized like that anymore. Basically, they've just opened up more land to more dense housing that has traditionally been more restricted. That traditional zoning is why we see so much less development on the western and northern sides compared to like the eastern side near like Soma and Mission Bay. Those eastern sides like Soma and Mission Bay have just had much looser— Basically the whole goal is to open up more land for more dense housing that has been traditionally restricted. So areas on that north and west side, now you will theoretically, or at least legally, be able to develop it in a more dense manner, not just on the eastern inside, like in places like SoMa and Mission Bay, that have been kind of the locations where the bulk of new development has occurred. San Francisco is also incentivizing conversion of old office buildings into housing to create more units. New amenitized office buildings, like the Class A buildings with big views, those are getting snatched up left and right and for big numbers. But the dated ones, there are a lot of them that are largely vacant with no meaningful prospect of returning to prominence in their current state. And at least according to the city, dozens of them are ripe for conversion into housing. The problem is there isn't a single active conversion project going on in San Francisco right now. They've reduced zoning limitations, they've eliminated transfer taxes on eligible projects, they have removed a ton of barriers to getting these projects approved and moving forward, but still not a single one is actually moving forward in the city. And the reason for that is because it's just so expensive to do that conversion work, way more expensive than just building from scratch. But a lot of these historic buildings, they can't be demolished, so you can't build from scratch in these buildings. So to help further incentivize conversions, San Francisco just passed major legislation creating the Downtown Revitalization Special Financing District. The program offers incremental property tax revenue to eligible conversion projects in the Financial District, Union Square, and parts of SoMa and Market Street. In total, it's estimated that about $1.2 billion will be offered to eligible conversion projects, which translates to, you know, 6 figures per unit that could be created under this program. So it's potentially huge savings. It's a great idea, but again, unclear unclear how effective it's going to be in actually spurring development because, you know, the problem here is that office valuations, be for the reasons that I talked about earlier, are starting to rise again. So buying these, you know, underutilized or, you know, largely vacant office buildings is now becoming more expensive. And even when they were cheaper, people still weren't pursuing conversion projects. We also still have pretty high interest rates and construction costs are very high right now, and that's probably not going to change anytime time soon. So unclear how effective it's really going to be at unlocking more units, but it is at least a step in the right direction. It certainly can't hurt. The city's also been very good about pushing forward with developers on massive multi-billion dollar mixed-use projects that will create thousands of new housing units across the city, in particular along the city's waterfront. A formal naval station on Treasure Island and Yerba Buena Island is being converted into an 8,000+ unit new community. Former industrial waterfront is being turned into multiple new mixed-use communities at Rock, Pier 70, and the old Petro Power Station near Dogpatch. There are huge developments in the permitting phases in Laurel Heights at the old medical campuses. Stonestown is getting a huge overhaul with thousands of new units, and there are a ton of other projects like this going on across the city. I've got videos on a bunch of them. I'll link a few of them in the description below. Go check them out if you're interested in learning what all these developments are about. They're pretty cool. Bottom line, the city has done a ton of work in conjunction with private actors to repair a lot of the damage that was done during and immediately after the pandemic and to help salvage the perception of San Francisco. If you want to stay up to date on all the incredible work the city is doing, how our real estate market is doing, or keep up to tabs on, you know, current events, new developments, or just generally all things San Francisco, subscribe to my channel because I make videos about that stuff every single week. And if you're thinking about buying or selling a place in the city and want to learn more about how all these changes we're seeing are impacting your local geographic submarket, reach out to me. I've lived in San Francisco for over 13 years. I've helped numerous people relocate here from all over the country. I'd I happen to be a resource for you, I'll put my contact info in the description below. Reach out anytime. And if you want the biggest headlines in San Francisco delivered directly to your inbox, I've got a weekly newsletter that accomplishes exactly that. Link to subscribe's in the description below. I would love to see you on there. And make sure to go check out some of those videos that I referenced. I hope you enjoyed, and I'll see you in the next one.