tech boom

Twitter and other tech start-ups are gravitating toward San Francisco.

Twitter will be moving into its new headquarters in downtown San Francisco this month.  It will occupy three floors of an 11-story 1937 Art Deco building that has sat shuttered for five years. Outside, its blue bird logo will replace the former main tenant’s sign, whose analog clocks remain frozen at 9:18, 4:33 and other times past.

Far from Silicon Valley’s self-enclosed campuses, Twitter and other tech start-ups are gravitating to an urban core here that has defied development for decades. Its soon-to-be neighbors include liquor stores, check-cashing stores and discount hotels.

At the Ironwok Japanese and Chinese restaurant, whose half-torn storefront banner flapped in the wind on a recent afternoon, the owners were waiting for Twitter with the same mixture of expectation and trepidation shared by much of the city toward the second tech boom in a little over a decade.

“Of course, Twitter is good for the city, but how about me?” said the owner, Jenny Liu, 41, explaining that her landlord was raising her monthly rent to $12,000 from $8,000.

Even more than the dot-com bubble of the 1990s, this boom could transform the fabric of the city.

This time, Twitter, Zynga, Yelp and other social network companies favored by venture capitalists have made San Francisco their home, creating jobs and raising commercial rents. At the same time, a growing number of young Silicon Valley workers, drawn by San Francisco’s urban charms, are also moving into the city as commuters and further raising rents.

In a city often regarded as unfriendly to business, Mayor Edwin M. Lee, elected last year with the tech industry’s strong backing, has aggressively courted start-ups.

But this boom has also raised fears about the tech industry’s growing political clout and its spillover economic effects. Apartment rents have soared to record highs as affordable housing advocates warn that a new wave of gentrification will price middle-class residents out of the city. At risk, many say, are the very qualities that have drawn generations of outsiders here, like the city’s diversity and creativity. Families, black residents, artists and others will increasingly be forced across the bridge to Oakland, they warn.

“Is Oakland Cooler Than San Francisco?” The San Francisco Bay Guardian captured the prevailing angst on a recent cover.

Kenneth Rosen, an economist and expert on real estate at the University of California, Berkeley, said that the boom was starting to hurt the “poor and middle class” but that it would benefit the “upper middle class.” Its full impact will not be felt for another couple of years, he said, adding, “We are early on in this boom.”

Mayor Lee said he would manage the city’s transition by furthering economic development while preserving its traditional qualities. Mr. Lee, who began his career as an advocate for the poor and housing rights, said his current priority — creating jobs — reflected his evolution on civil rights.

“I think the civil rights movement is no longer advocating from the outside,” he said. “It’s economic civil rights. You get people a job, you build their economic foundation, and then, if you set the right tone, they will start helping you build communities. We can’t do it with government-funded programs. We have do it with the private sector.”

With the tech industry generating most new jobs, Mr. Lee pushed through tax breaks for Twitter and other companies willing to move to downtown’s Mid-Market, a section with one of the city’s highest vacancy rates that he described as “our skid row.” Those breaks and others on stock options were necessary, he said, to keep rapidly growing start-ups from leaving the city and attracting new ones.

Twitter, which moved to its current location in another part of the city in 2009 with only 62 employees, plans to transplant its 800 San Francisco-based employees into its new 215,000-square-foot headquarters, said Karen Wickre, a company spokeswoman. The city estimates that Twitter may have 2,600 employees here within six years.

The tax breaks won Mr. Lee, a Democrat, the backing of Ron Conway, the venture capitalist who, despite being a longtime Republican, became one of the mayor’s biggest fund-raisers in his election to a full term in November. The move, Mr. Conway said, reflected San Francisco’s growing role in this tech boom, compared with the dot-com era during which the center of gravity was nearly an hour’s drive south, in Silicon Valley.

“Social media companies are tending to locate in cities so they can be in the audience, so to speak,” Mr. Conway said. Unlike dot-com companies, he added, most today are already profitable. “So this boom is going to be very, very sustainable and it’s going to have a permanent impact, a permanent positive impact, on the culture and economy of San Francisco.”

A few months ago, Mr. Conway and others created, an umbrella organization of 250 tech companies here. While representing the industry’s interests, the organization hopes to build civic ties by supporting training programs to create entry-level and support jobs in tech, said Mr. Conway, the group’s chairman.

But critics say the city is becoming too beholden to tech, pointing out that the mayor’s office recently intervened on two regulatory matters that would have hurt two start-ups backed by Mr. Conway, Airbnb and Square.

David Campos, a city supervisor who voted against the tax breaks for Twitter, said he was reserving judgment about the company’s commitment to San Francisco. “It’s important to see what the interaction and engagement they have with the community is,” he said.

The Mission, a neighborhood he represents, was among the hardest hit during the dot-com era when some start-ups set up shop in the city and then folded, though not before raising rents and dislocating longtime residents. Back then, antigentrification posters appeared in the Mission urging people to vandalize luxury cars parked in the area.

It is perhaps a measure of how neighborhoods have been gentrified in the intervening years that few marks of protests have appeared this time. In recent years, areas south of downtown have become increasingly popular among tech workers who live here but work south of here in Silicon Valley. Companies like Google, Apple, Yahoo and Microsoft run private buses that facilitate the reverse commute for their employees.

“A combination of being a bedroom for Silicon Valley and companies like Twitter establishing headquarters in the city has driven up rents extremely in the past year or so,” said Ted Gullicksen, director of the San Francisco Tenants Union.

RealFacts, a company that compiles rent data in many cities, said the average rent at 50 large apartment buildings it tracks here was now $2,663 — a record.

Mayor Lee acknowledged that he was worried that some groups were being priced out of the city, mentioning black residents, whose population has declined along with those of families. Mr. Lee recently proposed creating a housing trust to finance affordable housing for the next thee decades.

It is not clear whether the trust — which must be approved by the Board of Supervisors and voters in a vote in November — will become reality, much less what effect it will have over decades.

“If you have a city that is wall to wall with tech workers, that might be really cool from a tech worker’s standpoint,” said Peter Cohen, director of the San Francisco Council of Community Housing Organizations, a private group representing nonprofit housing developers. “But that is not the kind of rich diversity of population that makes San Francisco the place that it is.”

Photo credit:  The Examiner

Via New York Times