Extra! Extra! Hope for San Francisco

Not too much joyful economic news coming out of San Francisco. But here are a couple of nuggets to cling to: The city and its surrounding area are together becoming the nexus of the nation’s artificial intelligence industry, and more commercial property owners are inching toward residential conversions. Meanwhile, in New York City, medical practices and other healthcare providers are boosting office and retail markets that could really use the help.

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— Tom Acitelli, Co-Deputy Editor

San Francisco Leans Into AI and Conversions to Aid a Painful Recovery

San Francisco’s commercial real estate distress reached earthquake levels in June, and the aftershocks may be felt well into the future. Still, the roiled market there might find some calm in one booming industry in particular and in the promise of property conversions. The most recent negative headlines started when the city’s largest mall and two of its biggest hotels halted debt payments on properties that have contended with declining revenues due to persistent challenges related to the pandemic. Beyond retail, San Francisco has struggled more than any other large U.S. city in its office market recovery amid increased homelessness and crime that have caused multiple businesses to close or move. “With less commuting workers and with less tourism it brings trouble, and that trouble can be exacerbated with the higher interest rates and higher cost of capital,” said Lu Chen, a senior economist at Moody’s Analytics based in the company’s San Francisco office. “It has a snowball effect with people feeling less safe when they’re surrounded by less crowds when they walk on the street, and it makes some of the homelessness and public safety issues more obvious.”

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Medical Offices a Hidden Healthy Gem in New York’s Real Estate Market

In the now desperate search for professions resistant to working from home, medical is having a moment. Keeping New Yorkers healthy and upright is becoming more of a dominating presence in the New York area in the days of the pandemic as well as after the pandemic. Health care service providers grew their occupancy by 16 percent in the region between 2019 and 2023, as both workforces and patient demand grew, according to a survey from brokerage CBRE. In the meantime, the New York office market overall continues to struggle with historic availability as leases expire and owners have trouble lining up new tenants. The retail market, too, continues to confront an uneven recovery from the pandemic and one that has owners trying all sorts of experiential ways to fill space.

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