Adam Z., partner since 2021 (Toronto, Ontario)
This week in charts
Housing
ESG
Fire Sale: $300 Million San Francisco Office Tower, Mostly Empty. Open to Offers.
One building, a 22-story glass and stone tower at 350 California Street, was worth around $300 million in 2019, according to office broker estimates.
That building now is for sale, with bids due soon. They are expected to come in at about $60 million, commercial real-estate brokers say. That’s an 80% decline in value in just four years.
This is how dire things have become in San Francisco, an extreme form of a challenge nationwide. Nearly every large U.S. city is struggling, to some degree, with reduced office-worker turnout since the pandemic spurred remote work.
No market was hit harder than San Francisco, for reasons including its high costs, reliance on a tech industry quick to embrace hybrid work, and quality-of-life issues such as crime and homelessness.
Many of the city’s most prominent corporate tenants, from Salesforce Inc. to Facebook parent Meta Platforms Inc., are flooding the office market with space for sublet rather than waiting for their leases to expire. The lack of office workers is rippling throughout the financial district, leading restaurants, retailers and other small businesses to lay off employees or close.
In February, San Francisco Mayor London Breed rolled out her plan to revitalize the downtown office market, the latest U.S. city to announce steps to recover from the office-worker exodus. Her proposal includes a mix of tax incentives.
Any financial solution to the city’s problems is made harder because property owners are among the city’s biggest taxpayers and now are earning considerably less income. The San Francisco controller’s office forecasts up to $1 billion in lost property taxes for local agencies from commercial buildings alone through 2028. Retail sales have fallen steeply in San Francisco.
Ms. Breed asked city department heads to prepare for cuts of up to 13% over the next two years to cope with a projected budget shortfall over that time of $780 million, or 6% of the total general-fund revenue, amid overall economic risks.
Average asking office rent was $75.25 a square foot in the first quarter of this year, compared with $88.40 the first quarter of 2020, according to CBRE. Meanwhile, tenants are getting sublease space for as low as $25 a square foot. That is just enough to pay the electricity, heat and other costs to operate a building, said Elizabeth Hart, president of North American leasing for commercial property services firm Newmark Group Inc.
This week’s fun finds
The World Chess Championship is currently happening in Kazakhstan, but the world chess champion, Magnus Carlsen, isn’t participating. He has chosen to abdicate his throne, surrendering the title he first won in 2013 without defending it for a fifth time. Instead, the match—a best of 14 games (plus tiebreaks, if needed)—is between Russian grandmaster Ian Nepomniachtchi, who faced Carlsen for the title in 2021 and is the second-ranked player in the world, and Chinese grandmaster Ding Liren, the world’s third-ranked player. When asked before the start of the match who he thought would prevail, Carlsen replied, “I don’t care.”
For the last 10 years, Carlsen has stood head and shoulders above the world’s best chess players. The 32-year-old Norwegian currently holds chess’s top Elo rating, 2853, more than 50 points higher than either of the current competitors for the world championship. He achieved the rank of grandmaster at the age of 13 and at 19 was the youngest player to reach the no. 1 ranking. He has won five world championship titles, four World Rapid Chess Championships, and six World Blitz Chess Championships. His peak Elo rating of 2882, achieved twice in 2014 and 2019, is the highest in chess history. Magnus Carlsen is without rival, living or otherwise.
And during all of this, where is Magnus Carlsen? He doesn’t appear to be coming to Kazakhstan after all. Instead, he’s in Los Angeles, at the Hustler Casino, playing $100 to $200 no-limit poker against TikTokers and YouTubers. Like a lot of elite games players, Carlsen is a bit of a polymath, and he has a proclivity for gambling on games of skill. He excels at poker, has crushed fantasy sports, has a sponsorship with the sports betting site Unibet, and hosts a podcast with sports bettor Magnus Barstad. It’s yet another reason to forgo the intense yearlong preparation for a World Chess Championship defense. Perhaps Magnus simply has other things he’d rather be doing. After all, playing chess has already made him incredibly wealthy. He’s already reached the highest pinnacle of the game and etched his name in the history books. There might be something to be said for remaining king of the hill for as long as one possibly can, but that doesn’t appeal to Carlsen. “Four championships to five, it didn’t mean anything to me,” he said about his last title defense. ”It was nothing. I was satisfied with the job that I’d done. I was happy not to have lost the match, but that was it.”
John Oliver Tells Us Why No One Should Trust Jim Cramer
Last Week Tonight host John Oliver with a reminder of why no one should take financial advice from Jim Cramer following a segment on cryptocurrency and the risk it poses to our financial sector.
(2 min video)
