BLUE CITY BLUES: The Retreat from San Francisco Continues.

The FT’s article is accompanied by a chart which shows that hotel revenues per room are down slightly over 30 percent (May 2023 versus May 2019) in San Francisco. The only other city on the chart showing a fall is Chicago (down just under five percent). Revenues in Los Angeles are up around 10 percent, slightly ahead of New York City. Declining tourist traffic from China is a part of the story in San Francisco, but, clearly, only a part.

As Tabby Kinder, the writer of the FT’s report notes, in the city’s financial district, some office towers have been changing hands at a quarter of the price at which they were being marketed “three years ago” (presumably that’s a reference to pre-Covid prices). Potential bargain hunters evidently don’t have much confidence in their ability to price in how much further the sell-off has to go. There’s an old adage in financial markets that you shouldn’t try to catch a falling knife (meaning that a sudden decline in a security’s price does not necessarily mean that it’s cheap) and real-estate investors seem to be looking at San Francisco and seeing a lot of falling knives. They may well be right.

San Francisco might comfort themselves with the knowledge that their city still has the highest per capita income in the country (or very close to it), but once upon a time, so did Detroit.