What Do Mass Layoffs in the Tech Industry Mean for the Future of Mid-Market?

Mass layoffs at Twitter under Elon Musk are putting an unknown number of Bay Area residents out of a job and placing the future of the company's San Francisco headquarters in the mid-Market neighborhood in question. The recent upheaval and chaos surrounding Musk’s Twitter takeover are also raising concerns about the future of mid-Market itself.

Twitter's move to mid-Market in 2011 sparked dramatic changes in the struggling neighborhood, which in 2010 had the highest commercial vacancy rate in San Francisco. Many buildings — including the one Twitter moved into, originally a Depression-era showroom known as the Western Furniture Exchange and Merchandise Mart — had experienced nearly 50 years of office vacancies.

In a push to revitalize the district's economy by attracting new businesses to the area, the San Francisco Board of Supervisors in 2011 approved a controversial six-year payroll tax break for companies in the neighborhood; the policy was championed by leaders including then-Mayor Ed Lee. It would come to be known as "the Twitter tax break," and quickly drew criticism from residents who saw it as corporate welfare.

"[We wanted to see] greater activation of that corridor, attracting business and jobs … building a more robust local economy for our small businesses that were located on the mid-Market corridor," said former District 6 Supervisor Jane Kim, who backed the legislation, in an interview with KQED’s Tara Siler.

"The hope was that we would attract more workers, more residents into an area that had felt desolate and wasn't attracting a ton of commuters," she said. "Ultimately, we were successful — Twitter did attract a number of businesses to the mid-Market corridor when they decided to move in, and [it] did spur a lot of residential development in that area."

Now, with Elon Musk laying off an estimated 50% of Twitter staff — along with other major layoffs at tech companies in the Bay Area and beyond — the future of mid-Market is uncertain.

“Well, it's certainly a net negative when our fastest-growing industry is beginning layoffs,” said Kim. “That being said, I don't believe we need to be sounding the alarm bells. And I don't think any of us ever thought that the incredible boom that we saw between 2012 and 2020 would continue indefinitely. There was always a sense that a market correction was coming, and this is certainly the market correction.

"I think the question is, how big will this recession be, and how big will the impacts of the layoffs continue to be here in San Francisco?"

Despite a range of concerns regarding new management at Twitter and the future of the neighborhood, current District 6 Supervisor Matt Dorsey sees an upside to Musk’s acquisition of Twitter and what it means for mid-Market.

“I know that there's a lot of big global issues about Elon Musk's takeover of Twitter, what it's going to mean for public debate and for democracy,” said Dorsey. “It's concerning whenever there is any kind of a layoff, let alone a mass layoff like this, where we're talking about 784 employees in one San Francisco office.”

"But there's also a neighborhood here, and we want people to come back to work because we want small businesses to thrive," he said. "So there is, I think, a silver lining to the bad news about the mass layoffs, as Elon Musk has made clear that he wants Twitter employees to come back to the office."

Others think a completely new approach is needed for mid-Market — one that is less reliant on tech companies and the traditional 9-to-5 work crowd.

“I think the model that we really need to be moving toward is having a much more mixed-use downtown,” said Honey Mahogany, who is running against Dorsey for District 6 supervisor. (As of Wednesday afternoon, Dorsey led by about 1,400 points.) “I think that if we make downtown more residential mixed-use with office and also nightlife, arts and culture and all the things that make the south of Market so special, that will create a thriving neighborhood that actually supports those businesses that are there — not just 9-to-5, but seven days a week.”

Two closely affiliated organizations — the Mid-Market Business Association and the Mid-Market Foundation — have sought to revitalize and transform the area, starting with a focus on safety. A pilot program of safety ambassadors is aimed at making the area attractive not just economically but socially and artistically, said Steve Gibson, executive director of both MMBA and the MMF — turning it into a vibrant, multifaceted community where people live, work and play.

“Right now we have 40% vacancy in storefronts, and that’s bad,” said Gibson. “But it’s also a lot of opportunity to place new activities and new businesses. We just received a $50,000 grant from the city to work on this. We are looking at the strengths of Market, which has always had a strong presence of the arts. We’re working that into the fabric more and attracting more of those businesses and elements. We believe that Market's going to be a place that you engage in.”

Gibson plans on addressing the current high levels of storefront vacancies with more restaurants, music and art businesses.

“We have to do it differently than it has been done before. You have to think out of the box when it comes to mid-Market,” said Gibson. “There’s got to be a lot more creativity and imagination, and we have to think how [mid-Market] is going to be different from Union Square, different from downtown. The offering has to be unique to attract people to spend time in mid-Market.”

If Honey Mahogany is elected supervisor, her vision might complement that of Gibson and the work the MMBA and MMF are doing.

“It's interesting, because even though we're seeing sort of the exodus of some types of businesses or tech, I think there's a tremendous opportunity to actually grow in other sectors,” said Mahogany. "For example, right now we see the intense pressures brought on by climate change, and we have solutions that are in the making right here in the Bay Area. We have a growing sector in the climate tech industry, and some of it is based here in San Francisco."

Unfortunately, said Mahogany, some of those companies are moving out of San Francisco and to places like the Peninsula due to zoning and other issues. "Really taking this opportunity to encourage those companies to stay here in San Francisco and expand might actually change things for us," said Mahogany. "Not only would it provide a great tax base for the city, but it would also … require people to be there in person."

That said, Steve Gibson still sees the big tech businesses as crucial to the fabric of mid-Market.

"We'd love to have the large tech offices back. Those are customers. Some of them will be back. A lot are downsizing," he said. "We miss them. But again, we have to look for other customer bases."

Scott Lowe, owner of Chai Bar, located at 1019 Market Street, says his business won't be affected as much by the mass layoffs as it was by the pandemic. When tech companies allowed employees to work from home, he said, it hit businesses hard.

"The mid-Market neighborhood shut down in 2020 and it hasn’t come back," said Lowe. "Sales are a third of what they were ... When you're in a business like ours, we don’t necessarily draw tech workers from five blocks away from Twitter headquarters. Our impact is from the two-block radius of our space."

When foot traffic from tourists and tech employees in the area essentially stopped during 2020, Lowe was able to renegotiate the lease for Chai Bar with an asset manager from Deutsche Bank, who own the building.

"We were losing more money being open than being closed," said Lowe. "At one point, our gross sales was less than $250. Paying staff costs twice that amount in a day."

Looking ahead, Lowe is optimistic about the future of mid-Market, and says he's already seeing changes to a neighborhood that has faced issues with crime and homelessness.

"There are tourists coming around again," he said. "It's coming back."