Setting the Record Straight on Twitter, Mid-Market

by Randy Shaw, 2012-11-14

Since San Francisco enacted a payroll tax exemption in 2011 to help revitalize the city’s long troubled Mid-Market neighborhood, there have been frequent claims that attracting Twitter to the area has caused nearby commercial and residential rents to skyrocket. This argument was revived in this week’s SF Business Times story about the likely demise of a planned “arts district” at 950, 966 and 974 Market Street. The story was picked up by the Bay Guardian, which predictably concluded that Mid-Market’s “revitalization” is causing the “displacement of existing residents and businesses.” Actually, it’s not. In fact, the stalling of the proposed 950 Market arts development has nothing to do with Twitter’s arrival or Mid-Market’s tax exemption. Nor has Twitter' caused such negative "fallouts" as the displacement of arts groups, increased turnover of commercial spaces, or sharply rising neighborhood residential rents.

It seems very important to some people that the revitalization of Mid-Market have a downside for small businesses, commercial office tenants, and residential tenants. Reporters regularly want my take on the “flip side” of Market Street’s revival, only to get disappointed when I tell them that these negative impacts have yet to occur. That's why so many of these stories rely on anecdotes rather than facts.

950 Market

The site upon which arts groups hoped to develop and occupy has been vacant for more than a decade---long before Twitter even existed. Arts groups could have taken advantage of what current critics now see as very affordable pre-2011 land prices to buy the site and develop it---but they did not.

What actually happened at 950 Market, as JK Dineen in the SF Business Times carefully explains (the article is subscription only and cannot be linked), is that the same Urban Realty group that owned the City Place site across the street (now “Market Street Plaza”) bought the 950 Market site with the intent to develop a mixed use arts-housing project. This fell apart not because of Twitter coming to Mid-Market, but because Urban Realty lost its financing. Ownership of the land went to a Texas hedge fund that now wants to put the property up to the highest bidder.

The American Conservatory Theater was among the consortium of arts groups involved with 950 Market. The only reason 950 Market has been linked to Twitter is that ACT Director Ellen Richards wrote a letter to the mayor concerning the site in October saying she is worried that “as companies such as Twitter, Square and Dolby relocate to Mid-Market, the arts groups that have long been housed in the area will be priced out.”

Why Richards believed Urban Realty's loss of the property to a hedge fund had anything to do with Twitter and other companies is unclear. Yet the irony of Richards’ letter is that ACT had no presence in Mid-Market until it purchased the former Strand Theater after the city enacted its tax-exemption to revitalize the area.

In other words, ACT’s own conduct seems to confirm that by creating hope in Mid-Market’s revitalization, the so-called Twitter tax exemption attracted quality arts groups like ACT to invest in an area where they previously had no presence. The Strand site sat vacant for years, and if Twitter’s arrival raised values beyond the means of arts groups, ACT could not have been purchased the site.

I don’t know what arts groups in Mid-Market Richards believes are being priced out, but the fact is that arts groups have had surprisingly little presence in Mid- Market for decades. In 2005 the Tenderloin Housing Clinic and other opponents of Mid-Market Redevelopment sought to sought to create a Mid-Market Arts District as an alternative to the proposed Redevelopment Area. But arts groups told us that the area was less desirable than SOMA, the Mission and other neighborhoods where arts have flourished, and the idea of creating incentives to bring arts to Mid-Market---which the Redevelopment Agency also later backed--was dropped.

Simply put, the framing of Mid-Market as a neighborhood where low-income artists flocked to for low rents, only to be displaced by upscale new businesses, has no factual basis. Ground floor retail has never been cheap along Mid-Market despite the area’s problems, and many of the spaces are too big and/or required too much renovation for arts groups to afford.

Where is Mid-Market Displacement?

The biggest displacement of nonprofits and small businesses in the Mid-Market occurred at the Grant Building, 1095 Market, years before Twitter contemplated coming to the area.

In 2000, Sterling Bank acquired two large Mid-Market properties, confident of the area’s imminent transformation amidst the still going dot-com boom. Sterling immediately issued eviction notices to all of the Grant Building tenants. I represented the tenants, who included writers, artists, small businesses and the type of people who were great assets to Mid-Market.

We defeated the evictions, but after doing none of its planned renovations Sterling sold the property in 2008 to an investor who planned to transform the historic office building into an Adventure Travel/Youth Hostel. He vacated the building either by paying tenants off or not renewing expired leases. The Grant Building has sat vacant for years, and is now for sale.

The Grant Building displacements had nothing to do with Twitter, the tech boom, or the revitalization of Market Street.

Market Street retail had regular turnover in the pre-Twitter years, and there was more pure real estate speculation in Mid-Market during the dot-com years than today.

No Residential Impacts

The biggest falsehood about Mid-Market is that the arrival of Twitter and other high-tech companies has driven up residential rents in the area. This myth is widely propagated, despite the lack of evidence.
Rents have been steeply rising all over San Francisco for years, largely due to the city’s attractiveness and a sharp multi-year decline in new condominium construction. This kept potential owners in the rental market, artificially contracting the rental supply. What we know about Mid-Market is that rents sharply increased on vacant units when the new Trinity Plaza opened in early 2010, a year before the public debate over Twitter even began.

Twitter did not move to Mid-Market until July 2012, and there is no evidence that its employees have driven up neighborhood rents. Nor is there any evidence linking Dolby’s purchase of a building previously occupied by the State Workers Comp Insurance, or Square’s leasing space physically outside the core Mid-Market area, to any negative tenant impacts.

The newly built rental units in the pipeline at 10th and Market and nearby sites along Van Ness will likely attract higher prices due to tenants willing to pay more to live in that area than in the past. But that’s very different from claiming that tech companies are displacing residential tenants and arts groups, and causing greater rent burdens for existing residents.

We know from the Grant Building what real displacement in Mid-Market looks like. The arrival of high-tech companies to the area had not caused such impacts.

Randy Shaw is Editor of Beyond Chron and Director of the Tenderloin Housing Clinic