Speaker 1: Hello, Stephanomics. Here the podcast that brings you the global economy.
Speaker 1: This week, we have a Tale of Three Cities, which
Speaker 1: is also a tale about winning and losing in a
Speaker 1: world economy in flux, and why sometimes it can be
Speaker 1: difficult to tell the difference. Take San Francisco. It looks
Speaker 1: for all the world like a loser from post COVID
Speaker 1: work habits, A big chunk of its workforce hasn't returned
Speaker 1: to the city center and financially and socially its entire straits.
Speaker 1: But the San Francisco area is also at the center
Speaker 1: of the global AI boom from for large parts of
Speaker 1: the US tech fraternity, really the only part of the
Speaker 1: world you'd want to live. So it's complicated. California Bureau
Speaker 1: chief Karen Breslo and Bloomberg opinion columnists Justin Fox are
Speaker 1: going to help me make sense of it all in
Speaker 1: a few minutes. We also have a great piece from
Speaker 1: Seen Asia economy reporter and Michelle jam Risco in Singapore,
Speaker 1: a city that has benefited enormously from the economic and
Speaker 1: political shifts of the past few years, but where long
Speaker 1: term residents now struggle to afford a drink. But we're
Speaker 1: going to start with a cautionary tale from Dubai, which
Speaker 1: on paper at least looks like one of the big
Speaker 1: winners from the invasion of Ukraine last year and all
Speaker 1: the geopolitical events that have unfolded since then. But if
Speaker 1: you're living in Dubai, there's definitely been some downsides to
Speaker 1: this influx of people and wealth that's followed that invasion.
Speaker 1: I'm going to have a quick chat with Manus Cranny,
Speaker 1: distinguished longtime anchor for Bloomberg who's been based in Dubai
Speaker 1: for a while. Manus, thanks for joining us. I guess
Speaker 1: I should start by just asking you to paint a
Speaker 1: bit of a picture. I have been there a couple
Speaker 1: of times in the last year, and I can certainly
Speaker 1: see people complaining about there being no Rolex shot watches
Speaker 1: left in the stores because of the Russians arriving. But
Speaker 1: you know what's it been like to be there.
Speaker 2: High class Problemsphanie, And there are many.
Speaker 3: I mean, I can tell you there was a palpable
Speaker 3: change in this city how we live, what we spent
Speaker 3: to live, how we get around in the past year,
Speaker 3: year and a half. And this acceleration began before the
Speaker 3: Russian invasion of Ukraine in terms of rent prices, congestion
Speaker 3: tough to get an uber price gouging by uber Why, Stephanie,
Speaker 3: Because post COVID you saw this huge influx of not
Speaker 3: just you know, Russian emigrats, but wealthy Europeans beginning to
Speaker 3: look at the value differential per square foot here in
Speaker 3: Dubai relative to the Cortezu, relative to Paris, relative to Berlin,
Speaker 3: and relative to London. And it began to offer them
Speaker 3: a glimpse of six months of the year where you
Speaker 3: could live in beautiful weather from October through to the
Speaker 3: end of March, and you could get yourself a million
Speaker 3: dollar pad, which you just couldn't buy in any of
Speaker 3: those cities on the beach overlooking the Marina. And suddenly
Speaker 3: people began to look at this city in a very
Speaker 3: different way. And then the Russians came, and my gosh,
Speaker 3: it just exploded.
Speaker 1: And of course the main thing people talk about is rent.
Speaker 1: And you should tell us you had your own experience
Speaker 1: with a rent increase which you helped to go viral.
Speaker 3: Yeah, I got a rent review through They asked me
Speaker 3: for fifty two percent increase year on year, to which
Speaker 3: I went what you know, fifty two percent. So I
Speaker 3: got on LinkedIn Welcome.
Speaker 2: To my home.
Speaker 4: So to understand inflation is to understand the rent increase
Speaker 4: that I've just been sent. My landlord wants to raise
Speaker 4: my rent by fifty six percent.
Speaker 2: Yeah, fifty six.
Speaker 3: And I talked about this is what happens when cities
Speaker 3: get greedy and landlords get greed.
Speaker 4: You want to understand the definition of greed, then that
Speaker 4: is the very personification of it.
Speaker 2: And all I can say is.
Speaker 4: You know, the implosion of an economy and a city.
Speaker 2: Is driven by the lunacy that is greed. I'm really
Speaker 2: rather vexed.
Speaker 3: One could say, now through I wouldn't say any great
Speaker 3: negotiation skills, but I would say through you know, blunt
Speaker 3: hammer approach. I ended up offering thirty two percent of
Speaker 3: a rent increase, and they accepted that they wanted to
Speaker 3: keep me as a long term tenant. We tooed and
Speaker 3: throwed over a couple of prices, but I chose to
Speaker 3: pay the extra because this stock and inventory of equivalent
Speaker 3: properties available in the area where I want to live
Speaker 3: was very, very limited. And I should add I, Stephanie,
Speaker 3: you know where the office is here. We're in the
Speaker 3: heart of the DIFC, the heart of Dubai Financial District,
Speaker 3: and I live very close. I'm very privileged to live
Speaker 3: four minutes away in an uber and a fifteen minute walk.
Speaker 2: Yes, I walk home from work.
Speaker 1: It's when it's not but it's good five degrees heat.
Speaker 1: But yeah, you have to keep that, keep that quiet
Speaker 1: because everyone else living in big cities will hate you
Speaker 1: for that four minute commute. But I have heard some
Speaker 1: horror stories about rent. I mean, is this was this
Speaker 1: typical of the experience of other people, friends of yours,
Speaker 1: colleagues in Dubai.
Speaker 3: I got away lightly, if you can call a thirty
Speaker 3: two percent hike getting away lightly. Lots of friends have
Speaker 3: been through different scenarios. One, you're giving a notice to
Speaker 3: quit because the landlord says we're going to come back
Speaker 3: in and live in the property.
Speaker 2: They don't. They simply get you to vacate.
Speaker 3: They are then able to raise the rent by an
Speaker 3: even bigger proportion. The second thing that they do is
Speaker 3: think of Dubai as a concentric circle, Stephanie. Inside the middle,
Speaker 3: there's the DIFC where there is no rent regulation and
Speaker 3: what soever. And then you go outside of that and
Speaker 3: you have a whole other area of Dubai, which is
Speaker 3: ruled by a regulatory boldery called rerop so me the
Speaker 3: tenant can go to the regulatory body challenge the rent
Speaker 3: rise and to a certain extent it will be enforced
Speaker 3: because do Bai still want people to come from London,
Speaker 3: from Madrid, from all around Europe and the United States
Speaker 3: of America, so they're conscious of this housing costs. And
Speaker 3: I got quite a few calls and responses to the
Speaker 3: video that I put on LinkedIn in terms of, you know,
Speaker 3: just an.
Speaker 2: Overall response from a variety of levels of organizations in
Speaker 2: the city.
Speaker 1: We're going to talk more broadly in this show about
Speaker 1: the way that cities have handled economic success and the
Speaker 1: problems it can sow for the future if you don't
Speaker 1: handle it well. I mean, housing comes very high on
Speaker 1: the list if you start to make it difficult for
Speaker 1: people to not right at the upper end of the
Speaker 1: income scale, to live comfortable in that city. When we
Speaker 1: think of Dubai, we think of construction and you know, building,
Speaker 1: apartment buildings and other things going up very quickly. Is
Speaker 1: it something that they're responding to effectively? Do you think this?
Speaker 1: Are they handling this success well?
Speaker 3: I think they are even shot by the level of
Speaker 3: success that they have had. And in terms of the risk,
Speaker 3: the risk is this is that you price on the
Speaker 3: very sort of typical expatriate family that might come to
Speaker 3: live here, or you know, the kind of construct to
Speaker 3: parents and a couple of kids.
Speaker 2: I'm just looking at some stats.
Speaker 3: The average rent for a villa, a family home jump
Speaker 3: by twenty six percent last year. That's eighty thousand dollars. Okay,
Speaker 3: that's called in Cbori. The average apartment rent went up
Speaker 3: by twenty eight percent. They are conscious they need to
Speaker 3: deliver more supply, and that supply is coming like they
Speaker 3: have a bit of a desert that they can build into.
Speaker 3: So they are extending the growth of Dubai in a
Speaker 3: variety of directions, both along the coastline. And there's some
Speaker 3: big prime projects coming on board there that were perhaps
Speaker 3: you know, dumped in the post financial crisis, and they
Speaker 3: are building lots of smaller family units, smaller apartments which
Speaker 3: are affordable. It just means you need to move further out.
Speaker 3: You won't get a four minute commute. You move further right,
Speaker 3: you can get a consider you can get a less rent.
Speaker 2: I don't know.
Speaker 3: About considerably less rent, but you can get a much
Speaker 3: more competitive rent in a lot of various Let's say
Speaker 3: family constructs apartment constructs around the periphery of the city,
Speaker 3: and that is the growth of a city, isn't it.
Speaker 3: The question is the infrastructure is that there to support that?
Speaker 3: And that's perhaps the bit that's lagging.
Speaker 1: And I'm sure your colleagues of Bloomberg will be delighted
Speaker 1: for you having given chapter and verse to senior management
Speaker 1: at Bloomberg on why they need a bigger pay rise
Speaker 1: at the end of this year. I'm going to let
Speaker 1: you go in a minute manage, but I know you're
Speaker 1: about to relocate to New York. Do you think it's
Speaker 1: going to be any better there?
Speaker 2: Seventy? I guess it is.
Speaker 3: I've done a lot of steps in New York last week,
Speaker 3: fourteen to fifteen thousand steps a day, So, first of all,
Speaker 3: to give you some perspective, and very fortunate, I live
Speaker 3: in about fifteen hundred and sixteen hundred square feet.
Speaker 1: Somebody said to me, which part of this is not
Speaker 1: going to happened?
Speaker 2: Yeah? Which part of this trade? Have I given great
Speaker 2: thought to? Forty percent tax?
Speaker 3: To pay fifty percent more rent to live in fifty
Speaker 3: percent smaller apartment. It's not quite as drastic as that,
Speaker 3: but I can tell you, having walked around a lot
Speaker 3: of property in New York last week, I'm going to
Speaker 3: be living in a heck of a smaller apartment, and
Speaker 3: I reckon, I'm going to be up another fifteen percent
Speaker 3: to live in fifty percent smaller apartment.
Speaker 1: Well, you did have it relatively easy for a few years,
Speaker 1: as you've admitted, But thank you very much, Betters. And
Speaker 1: you've you've introduced actually something which we're going to be
Speaker 1: talking about now, which is, you know, maybe a city
Speaker 1: that's a bit further down this road and actually is
Speaker 1: not making it easy for middle class, ordinary families to live.
Speaker 5: Because people aren't just rich, they're crazy rich. And you
Speaker 5: really should have told me that you're like the principal Inamodesia.
Speaker 6: That's ridiculous.
Speaker 2: That's more of a Harry.
Speaker 5: When the international blockbuster Crazy Rich Asians was released in
Speaker 5: twenty eighteen, Singapore's Prime Minister Lisia and Lune laughed at
Speaker 5: the impression the movie brought on the city state.
Speaker 6: Crazy Rich Asians have nothing to do with us. We
Speaker 6: don't live like that, and I think it'd be disastrous
Speaker 6: that Singapore has got the idea that that is the
Speaker 6: way we ought to live.
Speaker 5: Well, that kind of jinxed it five years in one
Speaker 5: global pandemic later, a huge influx of wealth, a lot
Speaker 5: of it from China, has made Singapore a playground for
Speaker 5: the rich and crazy expensive for everyone else. Singapore's core
Speaker 5: inflation is April held firm at five.
Speaker 6: Thought has been ranked the most expensive city to live.
Speaker 2: In over and over and over again.
Speaker 7: Every day is expensive cars, housing, I think four is
Speaker 7: also rising in con.
Speaker 3: Berries and I was it there so much as property
Speaker 3: costs in Singpole like one million.
Speaker 8: Five bedroom house four hundred and eight million dollars.
Speaker 5: You can see the stresses, especially in rents.
Speaker 9: Yes, I mean the rental market was still continuing its
Speaker 9: crazy upward spiral from the beginning of the year.
Speaker 5: Juliette Standard of City prop Property, who's been a Singapore
Speaker 5: real estate agent for twenty three years, It's seen a.
Speaker 9: Lot of experts coming in from Hong Kong and a
Speaker 9: lot of mainland Chinese coming in from Hong Kong, China, Taiwan,
Speaker 9: and a lot of locals still were having to rent.
Speaker 2: What did ch.
Speaker 5: As Chinese President Xijingping PUSH's common prosperity at home. The
Speaker 5: most prosperous Chinese are looking to protect their cash. They're
Speaker 5: pouring it into assets beyond their borders, and that accelerated
Speaker 5: with the end of China's COVID zero policies and resumption
Speaker 5: of travel. A lot of that money has ended up
Speaker 5: here in Singapore. The number of family investment offices nearly
Speaker 5: tripled over the past two years, and just recently the
Speaker 5: city climbed ranks into the top five most expensive cities
Speaker 5: in the world and the most expensive for luxury living
Speaker 5: by some estimates. Unlike other major cities, rents didn't drop
Speaker 5: in the COVID era, They've only gotten worse. One measure
Speaker 5: shows condo rents surge more than thirty percent in the
Speaker 5: first quarter compared to the same period a year earlier.
Speaker 5: That's the fastest pace in fifteen years. Expiring leases has
Speaker 5: become a source of stress, as it's not uncommon for
Speaker 5: landlords to demand double or more upon renewal. Under the pressure,
Speaker 5: real estate agents are seeing an outflow, especially of middle
Speaker 5: class foreigners who simply can't afford Singapore anymore.
Speaker 9: So there's been a lot of remigration out of Singapore
Speaker 9: back to other parts of Asia. Specifically, a lot of
Speaker 9: Hong Kong expats who came in last year, quite a
Speaker 9: few kind of number are going back to Hong Kong
Speaker 9: because they're kind of comparing the prices with Hong Kong
Speaker 9: prices and you know, there's actually not much difference now.
Speaker 9: And then there's a lot of people who are leaving
Speaker 9: Singapore and going to places like Bali or jb or Vietnam,
Speaker 9: Thailand because it's so much cheaper. So you know, there's
Speaker 9: a lot of people who are rethinking their plans and
Speaker 9: having to leave Singapore.
Speaker 10: Now.
Speaker 5: It's not just the housing market getting squeezed. The food
Speaker 5: and beverage industry aka Singapore's pride and joy is also
Speaker 5: seeing a hallowing out in the middle market. Michelin Star
Speaker 5: chef Michael Wilson told me that he added a steak
Speaker 5: entree to his menu for eighty eight SEEING dollars or
Speaker 5: about sixty six US dollars, just to test the range
Speaker 5: of prices customers were willing to pay. That's more than
Speaker 5: twice the cost of any other entree he had on offer.
Speaker 5: In the first weekend on the menu, they ran out
Speaker 5: of steaks. Besides the influx of new cash. The government's
Speaker 5: labor policies aren't helping either. In twenty twenty one, Singapore
Speaker 5: tightened hiring quotas, limiting foreigners to thirty five percent or
Speaker 5: less of staff and services jobs. This year, they raised
Speaker 5: the minimum salaries for local employees and food and beverage rolls.
Speaker 5: Michael Callahan is the owner of Barbary Coast Bar. He
Speaker 5: told me this is all making for a very complicated calculus.
Speaker 11: As we're seeing actually where we saw the inability to
Speaker 11: afford new staff, now we're seeing the inability to retain
Speaker 11: our current staff.
Speaker 5: A lot of restaurant owners said, the quotas for hiring locals,
Speaker 5: we're making it unwise to hire foreign workers at all,
Speaker 5: because when one local staffer quits, the resulting ratio could
Speaker 5: make them ineligible to stay open. Callahan warns that too
Speaker 5: many in the industry will break under the pressure and
Speaker 5: raise menu prices that will force restaurants to cater to
Speaker 5: an even wealthier, more niche clientele.
Speaker 11: When you get to the point that you're charging twenty
Speaker 11: eight twenty nine thirty dollars a cocktail, there isn't a
Speaker 11: lot of people that can justify going out two three
Speaker 11: nights a week, much less four or five nights a
Speaker 11: week when the single serving of a cocktail is twenty
Speaker 11: eight dollars plus plus. So now you have a very
Speaker 11: very small pie and they're very very much I don't
Speaker 11: want to say too similar, but they kind of are.
Speaker 11: So what's happening now.
Speaker 7: Is that we're catering towarding well, we are personally, but
Speaker 7: a lot of the industry's catering towards this smaller group
Speaker 7: that have a particular taste, and that's actually reducing how
Speaker 7: creative we're getting.
Speaker 11: And that's why said, yeah, I see that, because.
Speaker 5: It's Callahan helped me understand the changes to Singapore's dining
Speaker 5: out culture. But since this is an economics podcast, I
Speaker 5: also turned to sing one song he's watched the shift
Speaker 5: play out over the past three decades. He's an economist
Speaker 5: at cimb Private Banking who follows trends in the industry
Speaker 5: as a gauge of how Singapore's broader economy is doing.
Speaker 8: I suppose I come here weekly mainly just because I
Speaker 8: pretend I'm up not in Singapore.
Speaker 5: At the glass and cased Flower Dome, part of the
Speaker 5: popular gardens by the Bay, complex. I sat with Song.
Speaker 5: The place was buzzing with tourists on a recent weekday a.
Speaker 8: Fifty years ago, when it's really about finding jobs and
Speaker 8: housing for the people after the production of that Singapore
Speaker 8: and so FMB fairly basic at that point in time.
Speaker 2: Just eating and.
Speaker 8: Feeding as a necessity to today greater disposable income especially
Speaker 8: important then it allows obviously the whole range of options.
Speaker 5: The whole range of options is getting leaner in the
Speaker 5: middle at the bottom of Singapore's famed hawker centers where
Speaker 5: you can get a full hot meal for just a
Speaker 5: few dollars, and those are still popular up and down
Speaker 5: the income ladder. Since twenty twenty, they've been protected with
Speaker 5: UNESCO World Heritage Status, top of special attention they received
Speaker 5: from the government such as Digital Transformation assistance in the
Speaker 5: past few years. On the high end, like Callahan pointed out,
Speaker 5: more wealthy customers are keeping up those top priced outlets,
Speaker 5: but in the middle there's a real crunch. But Song
Speaker 5: says Singapore will never be a cheaper place for doing business,
Speaker 5: and the high demand also comes from Singapore's neutrality in politics.
Speaker 8: Given the increased tension between China and US or Western
Speaker 8: government in general, where Singapore becomes even more of attraction
Speaker 8: for businesses as many of them Reshaw and Unshaw whatever
Speaker 8: businesses are on the U Singapore.
Speaker 2: As their hub.
Speaker 5: Altogether, the rising costs are raising some political and socioeconomic
Speaker 5: stress that's ahead of general elections that are due by
Speaker 5: November twenty twenty five. Officials have reassured that resumed construction
Speaker 5: will bring relief to rent soon. They've also instituted stamp
Speaker 5: duty increases, including a move in April that doubled the
Speaker 5: levee for foreigners buying residential property to sixty percent, and
Speaker 5: on Wednesday, Central Bank Chief Rovimannon played down the impact
Speaker 5: that cash flows into Singapore are having on inflation.
Speaker 1: Wealth in flows in Singapore into Singapore have literal effect
Speaker 1: on the exchange rate, domestic inflation, property prices or conferences.
Speaker 8: The step of inflation since late twenty one was mainly
Speaker 8: due to shop increases in global energy and food prices
Speaker 8: and beach proof.
Speaker 5: The Monetary Authority of Singapore says that the inflation fight
Speaker 5: isn't over, but they do see energy and food prices
Speaker 5: slowing further and wage growth easing. Real estate agent Juliet
Speaker 5: says she's seen rents fall off a cliff in the
Speaker 5: past few weeks, so maybe a market cool down is
Speaker 5: just around the corner. But the damage has been done
Speaker 5: and the stereotype that crazy rich Asians projected on Singapore
Speaker 5: seems to be solidified. It'll take a long time for
Speaker 5: people to change their minds. Here's Juliette again.
Speaker 9: So the perception of Singapore is that it's no longer
Speaker 9: a place where you can come and live relatively inexpensively.
Speaker 9: You can't save money here anymore. That's what a lot
Speaker 9: of expats see in Singapore.
Speaker 5: Michelle Jamrisco for Bloomberg News.
Speaker 1: So not so long ago, it was San Francisco that
Speaker 1: was the great boomtown. The city benefited more than any
Speaker 1: other from the rise of Silicon Valley. Books were written
Speaker 1: about how other places in the US might learn from
Speaker 1: its example. Now, though, it's become a byword for urban
Speaker 1: decline and dysfunction, with homelessness, a fentanyl epidemic making downtown
Speaker 1: and no go area for a big chunk of the population,
Speaker 1: and the commercial real estate market imploding. Big retail businesses
Speaker 1: are heading for the door. In fact, in recent weeks
Speaker 1: we've seen Whole Foods Nordstrom and the Westfield shopping mall
Speaker 1: all deciding to quit the city. So how did San
Speaker 1: Francisco get to this unhappy state? And are there parallels
Speaker 1: or lessons for cities elsewhere in the US. Well, I've
Speaker 1: got two excellent people here with me to speak about that,
Speaker 1: Karen Breslau, our California Bureau chief who's based in San Francisco,
Speaker 1: and Justin Fox, who's been on the program before, a
Speaker 1: Bloomberg opinion columnist who writes about lots of interesting things,
Speaker 1: including US cities and the challenges that they're dealing with. Justin, Karen,
Speaker 1: thank you very much for talking to me. Karen, there
Speaker 1: are a lot of horror stories about San Francisco doing
Speaker 1: the rounds at the moment. Just give us a sense
Speaker 1: how bad is it day to day.
Speaker 10: It really depends where you are and who you talk to.
Speaker 10: So if you are in the downtown financial district, which
Speaker 10: is where I am right now in our Bloomberg bureau
Speaker 10: here in San Francisco.
Speaker 2: It is dire.
Speaker 10: If you are a downtown landlord, if you are a
Speaker 10: downtown retailer, if you are a mayor staring into you know,
Speaker 10: empty city coffers, it is you know, from a fiscal standpoint,
Speaker 10: obviously terrible to have these giant skyscrapers with a thirty
Speaker 10: percent vacancy rate, you know, for the last several years
Speaker 10: due to COVID, and now with the tech downturn and
Speaker 10: work from home, you know, becoming the norm. You know,
Speaker 10: you are seeing definitely this, you know, the proverbial doom
Speaker 10: loop in this downtown area. If you go outside of
Speaker 10: the downtown into neighborhoods, I think you see a more vibrant,
Speaker 10: alive San Francisco. And the city is also undergoing an
Speaker 10: AI boom, right, so a lot of a lot of
Speaker 10: AI startups are here. But these you know, these are young,
Speaker 10: early stage companies. They don't fill skyscrapers, you know, their
Speaker 10: their work live lots and people's you know, the modern
Speaker 10: day version of the of the Hewlett Packard garage. So
Speaker 10: it really is it is blocked by block, but the
Speaker 10: city from a fiscal standpoint and also from morale, it
Speaker 10: is it is unusually dire.
Speaker 1: I mentioned that San Francisco obviously was the center of
Speaker 1: the previous tech booms of this century, and I think
Speaker 1: that's what people find surprising, because, as you suggested, there's
Speaker 1: success still there. There's still all those startups. How does
Speaker 1: that coexist with the kind of horror stories that we
Speaker 1: hear about downtown. Why is the city not benefiting from
Speaker 1: that continued success of parts of its economy.
Speaker 10: When you think about San Francisco, you really have to
Speaker 10: hold more than one thought in your head at the
Speaker 10: same time. This is a city, you know, that's been
Speaker 10: through booms and bus since the gold Rush. It is
Speaker 10: a boom and bust town, and so you know the
Speaker 10: most you know recent obviously we have the tech crash,
Speaker 10: you know, on the heels of of the COVID shutdowns,
Speaker 10: and before that we had the dot com boom, the
Speaker 10: dot com bust. So the city has seen this before.
Speaker 10: The difference is I think really that the hybrid or
Speaker 10: work from home models have flattened out what would be
Speaker 10: a normal recovery, uh and made so much of the
Speaker 10: commercial real estate, this incredibly valuable commercial real estate in
Speaker 10: downtown San Francisco that powers you know, the tax base
Speaker 10: of the city, and the and the and the retail
Speaker 10: base that has all gone. San Francisco is a very
Speaker 10: small city. It's surrounded by affluent suburbs where people you know,
Speaker 10: come into work. The population of San Francisco is hovers
Speaker 10: around eight hundred thousand. It's not a big major city
Speaker 10: in terms of population, but the you know, the commuters
Speaker 10: who come in and fill those offices and spend their
Speaker 10: money are simply not here in the numbers they were
Speaker 10: before the pandemic.
Speaker 1: And when people take the sort of long view, there's
Speaker 1: kind of a range of culprits that people point to
Speaker 1: for how the city got to this position, which, as
Speaker 1: you say, it's not all bad, but certainly downtown feels
Speaker 1: pretty bad. There's a one whole set of arguments that's
Speaker 1: around the tech boom itself, all the money that came in,
Speaker 1: the enormous increase in real estate values that made so
Speaker 1: much of San Francisco unaffordable. There's another set of critiques
Speaker 1: that's around sort of dysfunctional politics, and obviously that's what
Speaker 1: Republicans are doing attack ads about. You know, this is
Speaker 1: an example of leftist politics gone amuck. And then, as
Speaker 1: you've mentioned, you know, there's COVID and the fact that
Speaker 1: more people have just stayed at home since the very
Speaker 1: long period of shutdowns from the pandemic. When you think
Speaker 1: about it in your mind, I'm sure it's all of
Speaker 1: those things. But is there was there a sort of
Speaker 1: an original problem that in the way that that that
Speaker 1: all that influx of enormous amount of money from related
Speaker 1: to Silicon Valley got got handled.
Speaker 10: I think you've really laid out the cast of culprits
Speaker 10: very well. I would say the blame the tech Bros.
Speaker 10: Storyline was certainly here. What you know, during the boom days, right,
Speaker 10: you had people throwing tomatoes at these big white buses
Speaker 10: that would carry unlabeled of course, unmarked buses that would
Speaker 10: that would ferry workers from San Francisco to Google and
Speaker 10: Meta and Apple and Genent Tech and you know, all
Speaker 10: the big employers, and they were blamed for, you know,
Speaker 10: ruining the vibe in San Francisco. Then, of course dysfunctional politics.
Speaker 10: Why does this heavily democratic city in a heavily democratic
Speaker 10: state not have sufficient thousand there are? You know, I
Speaker 10: think I think there is legitimate blame for I would
Speaker 10: say an air of permissiveness around drug use which has
Speaker 10: completely gotten out of hand. I think that is legitimate criticism.
Speaker 10: And then overlying all of this, of course, is the pandemic,
Speaker 10: which really exacerbated trends that were clearly in place before
Speaker 10: and accelerated those trends and revealed, you know, a society
Speaker 10: that is so deeply unequal it cannot recover from COVID
Speaker 10: from the pandemic as other cities have.
Speaker 1: But I want to get on to the other cities
Speaker 1: in a minute. But just I guess one last question
Speaker 1: for now. Does it feel like there is a way out?
Speaker 1: I mean, as you identify, is not just one negative storyline,
Speaker 1: but certainly downtown that's the dominant story that's currently playing.
Speaker 1: Does it feel like the existing administration and the mayors
Speaker 1: has a route out of this? If only how to
Speaker 1: get hold of some money for a.
Speaker 10: Start, right, there's definitely a way out of this. San Francisco,
Speaker 10: you know, was flattened. I mean, this is what the
Speaker 10: mayor London Breed talks about. She said, Okay, so this
Speaker 10: is a city that was literally in smoke and ashes
Speaker 10: in nineteen oh six.
Speaker 2: It was over.
Speaker 10: It would never it would never come back after the
Speaker 10: great earthquake. And she says, a change in people's work habits,
Speaker 10: a change in people's retail habits is not the end
Speaker 10: of San Francisco. And there is definitely intellectual ferment. There's
Speaker 10: venture capital, a tremendous talent pool, major universities. All of
Speaker 10: that stays. But I think San Francisco is going to
Speaker 10: have to undergo a tremendous reining. There's not going to
Speaker 10: be this downtown core of thirty percent empty skyscrapers and
Speaker 10: empty shopping malls. These buildings look like fossils of the
Speaker 10: way American cities were even you know, just a few
Speaker 10: years ago before the pandemic. So I think, you know,
Speaker 10: the tax space is going to have to shift away
Speaker 10: from tech, it's going to have to shift away from
Speaker 10: real estate and financial services, it's going to have to
Speaker 10: shift away from retail, and these these are all the
Speaker 10: things that powered San Francisco as recently as the before times.
Speaker 2: So will this.
Speaker 10: Happen on our current political cycle. I think it's highly unlikely.
Speaker 10: I mean, we have an election you're coming up next year.
Speaker 1: Justin I mean, what Karen's describing obviously is sort of
Speaker 1: everything that we think of as being a city is
Speaker 1: going to have to be rethought. But you know, how
Speaker 1: much is San Francisco an outlier in a US context,
Speaker 1: and how much is it potentially a sort of harbinger
Speaker 1: of problems that other cities will be starting to have.
Speaker 12: I mean, it's a pretty big outlier. And really, I
Speaker 12: think Karen expressed this already. It's the working from home
Speaker 12: that has sort of caused all these things to come
Speaker 12: to a head. San Francisco had been struggling with all
Speaker 12: these problems for a while, and then suddenly Bay Area
Speaker 12: based companies were the most gung ho about getting people
Speaker 12: to stop coming into the office at the beginning of COVID.
Speaker 12: Let it keep happening forever. The one other city in
Speaker 12: the US that's sort of big city that's comparable in
Speaker 12: the percentage of people that are still staying home is Washington,
Speaker 12: d C. But it feels different. I guess like tourism
Speaker 12: has come back to Washington in a big way. So
Speaker 12: at least the streets are full of people, even though
Speaker 12: the offices are I guess all empty, especially the government offices.
Speaker 1: So yeah.
Speaker 12: And then the other issue is that the Bay Area
Speaker 12: public transit system, at least the Bay Arey Rapid Transit,
Speaker 12: the biggest part of it, is very much just funded
Speaker 12: by and to a much greater extent than most other
Speaker 12: public transit systems in the US. So that's undergoing all
Speaker 12: of these problems. Obviously, every major commercial district is struggling
Speaker 12: to some greater or less extent with the fact that
Speaker 12: people are coming into the office less often and maybe
Speaker 12: they don't need all those buildings, and that's going to
Speaker 12: be a long and difficult and expensive process to figure
Speaker 12: out what to do about it. But I have not
Speaker 12: seen any place else in the US, except maybe Portland, Oregon,
Speaker 12: which is sort of a similar economy and has kind
Speaker 12: of some issues of its own. They're even worse than
Speaker 12: San Francisco. But in general, it's unique.
Speaker 1: But it's interesting. I mean, it does. It feels a
Speaker 1: little bit like we're talking more now about kind of
Speaker 1: managing the long term consequences of success and of having
Speaker 1: a certain amount of wealth come into a city or
Speaker 1: a city sort of region in a way that maybe
Speaker 1: twenty thirty years ago we were talking about managing decline
Speaker 1: in some of these old industrial cities. When you look
Speaker 1: at somewhere like Miami or other places that are actually
Speaker 1: is starting to attract people from other parts of the country,
Speaker 1: certainly quite a lot of coming from Chicago for example,
Speaker 1: and sort of heading south. Are there things they should
Speaker 1: be looking out for, things to avoid or to try,
Speaker 1: and how should they respond to that influx of money
Speaker 1: and then not have some of the same dynamics that
Speaker 1: we've seen played out in San Francisco.
Speaker 12: Well, the simplest answer is you build lots and lots
Speaker 12: of housing. The difficulty is if you're in a coastal
Speaker 12: city that's already kind of pretty much full, it's hard
Speaker 12: to do. I think it's hard to do anywhere in
Speaker 12: the world. It seems especially hard in the US, although
Speaker 12: I guess I get the sense that the south of
Speaker 12: England is not super easy either. And so, I mean,
Speaker 12: like Austin, Texas has had this big inflow of people
Speaker 12: in wealth and has been adding new housing at a
Speaker 12: pace just way beyond any other large metropolitan area in
Speaker 12: the US, and so it's gonna have a lot of
Speaker 12: growing pains. And I don't know how all those people
Speaker 12: are going to get to work, but maybe they'll just
Speaker 12: work from home. But it's clear that it's these coastal
Speaker 12: cities in the US have had this extreme problem. In
Speaker 12: California's it's been by far the most extreme in responding
Speaker 12: to new demand for housing. That the Bay Area was
Speaker 12: creating all these jobs for the last couple decades and
Speaker 12: building very few new houses and apartments. I'm one of
Speaker 12: those people who it's all about the housing. I think
Speaker 12: clearly it's other things too, And right now a lot
Speaker 12: of the focus is on other issues. And you know,
Speaker 12: right now the Bay Area the last couple of years,
Speaker 12: people have been leaving, So you'd think that adding a
Speaker 12: whole bunch of new housing isn't the most pressing issue.
Speaker 12: But I don't know. I feel like that's that's at
Speaker 12: the core of it. And I mean in New York
Speaker 12: City it's a huge problem, which in New York City
Speaker 12: has had more of a rebound, more of a return
Speaker 12: of people, and housing prices here just in the city
Speaker 12: proper are insane, and whereas there's been at least some
Speaker 12: correction in San Francisco.
Speaker 1: In Europe, is very fashionable to talk about the fifteen
Speaker 1: minute city. I mean, is that going to be part
Speaker 1: of the sort of reinvention of downtown in some of
Speaker 1: these places?
Speaker 12: Well, I mean in San Francisco, the issue is that
Speaker 12: and this is true in New York although New York
Speaker 12: sort of has a couple of downtowns, but the best
Speaker 12: transit connections are all sort of go through that downtown,
Speaker 12: the financial district and nearby areas and so it's absolutely
Speaker 12: true that the neighborhoods out in San Francisco are pretty
Speaker 12: vibrant and you can live a fifteen minute lifestyle. But
Speaker 12: if you want to get to the other side of town,
Speaker 12: very often it ends up going through the middle. And
Speaker 12: so if that, something's got to happen with that core,
Speaker 12: and I just don't know what it is at this point,
Speaker 12: I just wanted.
Speaker 10: To chime in on the reimagining down the middle. I
Speaker 10: interviewed London Breed at our technology summit last week and
Speaker 10: she just threw out, She just spitball. She said, why
Speaker 10: are we all worked up about the empty mall? The
Speaker 10: Westfield Mall, which was taken, as you know, the death knell.
Speaker 10: And she asked the audience how many of you have
Speaker 10: shopped there in the last two you know, even in
Speaker 10: the last five years. Very few hands went up. She said,
Speaker 10: where do you get your stuff? You go online, you
Speaker 10: buy it, So why are we flipping out about an
Speaker 10: empty shopping mall. I'm paraphrasing her very very crudely, but
Speaker 10: she said, why do why do we need a shopping mall?
Speaker 10: Why why don't we have a soccer stage? So she
Speaker 10: kind of spitballed this idea, which got picked up here
Speaker 10: in lots of memes, and you know, then, of course,
Speaker 10: being San franciscoverybody started piling on about what a terrible
Speaker 10: idea that would be in hell could you? But you
Speaker 10: know I did that. Well, there there was a little
Speaker 10: she took a little, a little uh you know, flight
Speaker 10: of imagination right there in real time, with absolutely no forethought.
Speaker 10: But it maybe it does take that kind of radical reimagination.
Speaker 10: I mean, the Giants play downtown, you know, why not?
Speaker 10: Why not major League soccer?
Speaker 1: So all football as we might.
Speaker 10: I'm sorry, thank you. Yes, the spherical object to es.
Speaker 1: Well, that would be that would be very controversy. That
Speaker 1: would set us up for an enormous debate. In my household,
Speaker 1: we live in the shadow of an enormous Westfield, but
Speaker 1: we also where at least one of my children spends
Speaker 1: a lot of their lives. But there are also some
Speaker 1: keen football fans who quite wouldn't mind having a new
Speaker 1: stagment a very bad local team. So yeah, that'll set
Speaker 1: the conversation around the dinner table. So finally, we have
Speaker 1: to always because we now live also in the shadow
Speaker 1: of the presidential and general election in twenty twenty four.
Speaker 1: I mean I should ask both of you, but certainly, Karen,
Speaker 1: what are the political Clearly the Republicans think that they
Speaker 1: can make score some points, pointing to San Francisco as
Speaker 1: an example of an indi California as an example of
Speaker 1: a democratic rule runner.
Speaker 10: Muck.
Speaker 1: Are there broader political implications from what's going on?
Speaker 10: Yes, I think you can. You can throw San Francisco
Speaker 10: on the ballot pretty much anywhere you're running right and
Speaker 10: say is this what you want? We're already seeing this.
Speaker 10: We saw Ron de Santists come out. There does seem
Speaker 10: to be a little pattern of stopping to record, you know,
Speaker 10: a horror scene somewhere in San Francisco and shake their
Speaker 10: heads and say, oh my, is this what you want?
Speaker 10: So San Francisco is on the ballot everywhere, you know,
Speaker 10: shorthand for for democratic. Uh, dystopia if you're a Republican.
Speaker 10: And yeah, even if you're a Democrat, San Francisco right now, Uh,
Speaker 10: this bastion of you know, of tolerance and acceptance and
Speaker 10: creativity and social progress is very hard to point to
Speaker 10: the social values that Democratic voters might might agree with.
Speaker 10: If you look at some of the streetscapes, So it's
Speaker 10: it's very tricky, but I think in a weird way,
Speaker 10: you're going to see a lot more Republican candidates here
Speaker 10: to record their ads and collect their money.
Speaker 9: Uh.
Speaker 10: But that and maybe four or five percent of the
Speaker 10: of the electorate will vote for them.
Speaker 1: Well, it sounds like the mess to increase the fees
Speaker 1: for filming on the street anyway.
Speaker 10: Political ads, Yeah, they want to pass the tin cup
Speaker 10: right there.
Speaker 1: And just in final question to you, can you imagine
Speaker 1: any politicians, I mean, given that there's some serious economic consequences,
Speaker 1: is anyone going to be brave enough to tell people
Speaker 1: to go back to the office.
Speaker 12: I mean, obviously lots of people in New York have
Speaker 12: done that and in the financial sector pretty successfully. But politicians, well,
Speaker 12: I mean the mayor Adams here does that all the time,
Speaker 12: although he's final. It's funny because in New York City,
Speaker 12: and this was under Deblasio, his predecessor, they actually, uh
Speaker 12: required all city employees to come in five days a week,
Speaker 12: and they're finally relaxing that. Yeah, that's a pop I mean,
Speaker 12: the Republicans had this bill that they keep bringing up
Speaker 12: to I forget. It's got some great acronym, but it's
Speaker 12: in Washington to force federal employees to go back to work.
Speaker 12: So yes, I think there's a slight partisan valance to
Speaker 12: the whole going back to the office thing, because it's
Speaker 12: it's something that white collar professionals are the ones who
Speaker 12: can work from harm and they almost all the democratic
Speaker 12: these days.
Speaker 1: Karen Breslaud, Justin Fox, thank you very.
Speaker 10: Much, so closure, Stephanie, thanks for having us.
Speaker 1: That's it for this episode of Stephonomics. Next week we'll
Speaker 1: have more. In the meantime, you can get a lot
Speaker 1: more economic insight and news from the Bloomberg Terminal website
Speaker 1: or app. This episode was produced by Mangnus Hendrickson, Yang
Speaker 1: Yang and Summer Sadi, with help from Abria Ruffin. Special
Speaker 1: thanks to Manus Cranny, Michelle jam Risco, Kevin Varley, David Ramley,
Speaker 1: Karen Breslau, and Justin Fox. But Mollie Smith is the
Speaker 1: executive producer of Stephanomics and the head of Bloomberg podcast
Speaker 1: is Sage.
Speaker 2: Both