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San Francisco Federal Reserve president and chief executive Mary Daly called on the city’s technology founders to bring their employees back to work amid record-high office vacancies that have helped fuel concerns of an economic “doom loop” there.
“If you’re the founder of something and you’re part of this, then let’s change it,” Daly said at San Francisco’s Commonwealth Club on Monday. “This isn’t being done to us, we live in the city and so together we can help.”
She added that regenerating downtown San Francisco would require a “public-private partnership, working collectively to make sure that this is a place we want kids to live and other people to come”.
“Talk about what you need to fix and encourage your people to come back to work,” Daly said.
Office vacancies in San Francisco are the highest of any big US city at 37 per cent, according to property adviser CBRE, mostly due to a coronavirus pandemic-era shift to remote working by tech companies, which for years have powered the city’s economy. The Federal Reserve views the slump in the value of commercial real estate as one of the biggest risks facing the US financial system.
San Francisco has also suffered from a decline in tourism and its battle with social issues, such as high rates of homelessness and drug deaths. Those have prompted some retailers, hotels and other businesses to leave the city, and there are fears that the resulting decline in tax revenue could cause an irreversible economic spiral. Efforts to lure workers back have had limited success, with office attendance hovering at between 40 per cent and 45 per cent of pre-pandemic averages since the start of the year, according to city data.
“The question I always get asked is ‘is San Francisco in a doom loop, is the world over?’” Daly said. “We’re not there yet, there’s a lot of things we need to do to make this city better and live up to its potential, but I know the spirit is here and it will get done.”
Daly said the explosion of artificial intelligence start-ups in San Francisco, which have attracted tens of billions of dollars in funding from big tech groups and venture capitalists, had boosted the city’s commercial real estate market and could improve productivity in the workforce more broadly.
Young companies such as OpenAI and Anthropic have taken over swaths of office space in recent months that had been vacated by larger technology companies such as Uber.
Daly also sought to quell the notion that the rapid development of AI capabilities would damage the US labour market, calling it a “natural evolution of the economy”.
Speaking on a wide range of topics, Daly took a hawkish stance on inflation and emphasised the US Federal Reserve’s fight to restore price stability without disrupting the economy. “The bumpiness of inflation this year so far has not inspired confidence. It’s hard to know yet whether we’re on track to get price stability.”
The US Federal Reserve signalled earlier this month that it expected to cut interest rates just once this year, holding borrowing costs at a 23-year high of between 5.25 per cent and 5.5 per cent.
