Value of one of S.F.'s biggest buildings plunges by 80% after Uber, Block leave
An 80% plunge in the value of one of San Francisco’s largest office buildings after Uber and Block moved out is prompting broader questions about the city’s commercial real estate model. Commenters explain how office buildings are valued primarily on rental income, why landlords and lenders often resist cutting headline rents even when space sits empty, and how this can lead to long-term vacancies and financial stress as loans come up for refinancing. The exchange also touches on potential shifts toward mixed-use redevelopment, the changing appeal of San Francisco for tech companies, and the systemic risks if high vacancy and high valuations persist together.
Uber’s Business Model and Profitability
- Debate over how Uber can justify years of massive losses; one commenter misread its first annual profit as $1.83M rather than ~$1.9B, corrected via SEC filing.
- Some argue recovery of past losses isn’t required since equity, not debt, funded growth.
- Others see a “techno‑feudal” pattern: subsidize rides, kill competition, then raise prices.
- Defenders stress city‑by‑city economics: mature markets may be profitable while new markets burn cash.
- Network effects and two‑sided marketplace dynamics (drivers vs riders) cited as capital‑intensive via marketing and local operations.
- Barriers to entry seen not in the app itself, but in data, logistics, and density of drivers; skeptics counter FSD could undermine Uber’s future.
Commercial Real Estate Valuation Dynamics
- Office buildings are valued as a function of rent and income; lower rents or vacancies can trigger lender demands or violate debt coverage ratios.
- Landlords often hold asking rents high and instead offer free months, build‑outs, and “tenant improvement allowances” to preserve official rent levels.
- Some argue this is irrational and propose valuation formulas that decay with vacancy duration to push rents down faster and reduce emptiness.
- Others respond that real value is what buyers will pay, and lenders routinely “extend and pretend,” avoiding write‑downs.
San Francisco Office Market and Urban Conditions
- Many note widespread Bay Area retail closures; fewer office workers reduce demand for nearby shops.
- SF’s appeal as a tech hub is questioned: costs, competition for talent, and deteriorating street conditions (including drugs and safety) are deterrents.
- Counterpoint: dense expert networks, especially in tech and finance, still provide hiring and innovation advantages versus smaller or cheaper metros.
Specific Building and Location
- The featured building originated as a 1970s IT/data‑center “bunker”: large windowless floors, poor natural light, but unusually strong seismic safety.
- Interior office build‑outs (e.g., WeWork, Uber, Block) are praised, but the surrounding area is described as unpleasant and unsafe, depressing demand.
Mixed Use, Housing, and Vacant Space
- Commenters see single‑use commercial zoning as fading; mixed‑use (office + residential) viewed as the future.
- Some note widespread vacant commercial property and even “ghost” residential units held by investors or foreign capital.
- Disagreement on who benefits most from new high‑end development: some say only the rich, others argue any added supply indirectly helps everyone.
Pension Fund and Ownership Outcome
- A Canadian pension fund bought a 45% stake at a high valuation and later sold back at a steep loss.
- Discussion frames this as the operating partner effectively extracting gains on the way up and reacquiring the asset cheaply on the way down.