Billionaire Elon Musk says Twitter – the social media company he is in the midst of rebranding as "X" – will keep its headquarters in San Francisco despite the "doom loop" the city is facing as big-name businesses head for the exits.
Musk, who led a group of investors in acquiring Twitter that took the company private in a $44 billion deal last year, tweeted Saturday that the company’s headquarters will remain in San Francisco despite receiving offers aimed at enticing the company to relocate.
"Many have offered rich incentives for X (fka Twitter) to move its HQ out of San Francisco. Moreover, the city is in a doom spiral with one company after another left or leaving. Therefore, they expect X will move too. We will not," Musk explained.
"You only know who your real friends are when the chips are down. San Francisco, beautiful San Francisco, though others forsake you, we will always be your friend," Musk’s tweet concluded.
San Francisco’s economy has suffered from an exodus of businesses and residents in the last few years, creating a "doom loop" in which a local government enters a downward fiscal spiral as its tax base declines.
An urban doom loop involves a decline in workers present in offices in city centers, which results in businesses shrinking their office footprint and rental overhead. The decline in demand causes real estate prices to fall, which in turn reduces property tax revenue while other sources of tax revenue, like sales tax, also take a hit due to the reduced traffic in downtown areas.
As the overall tax base declines, it becomes harder for city governments to fund public services like law enforcement as they’re forced to make trade-offs that include things like budget cuts or tax hikes to stabilize their finances – both of which can drive more businesses and residents to depart if those policies have a negative effect on the economic climate or overall quality of life.
The growing popularity of remote work has accelerated that trend, decreasing the number of workers heading to the office on a daily basis as it becomes easier than ever for workers to live in suburban and rural areas without commuting.
The tech-heavy economy of San Francisco and criticisms of the city government’s record on public safety issues have made it a case study in the dynamics that drive urban doom loops. According to data from the Census Bureau, the population of San Francisco County declined by 7.5% from April 1, 2020, to July 1, 2022.
Commercial real estate firm CBRE released data in early July that showed that San Francisco had an overall office vacancy rate of 31.6% in the second quarter of 2023. The CBRE report noted that in the last quarter "negative net absorption accelerated due to slow leasing activity, combined with a high volume of lease expirations and several new sublease listings. This resulted in 1.83 million sq. ft. of occupancy loss, which increased the market-wide vacancy rate from 29.4% to 31.6%."
Although Twitter isn’t relocating its headquarters, the company has sought to shrink its office footprint in San Francisco and faced a lawsuit from its landlord earlier this year over unpaid rent – although the social media company has faced similar suits at offices in Denver, Oakland and London since Musk acquired Twitter and began a broad cost-cutting push to stabilize its finances.
Amid Twitter’s rebrand to X, city officials filed a complaint and opened an investigation into whether the company had the proper permits to install an illuminated "X" atop its downtown headquarters. Police had stopped the installation last week but later said there was a "misunderstanding" and that the incident was not a police matter.
City officials say a permit is required to change letters or signs on buildings or to erect a new sign on top of a building.
FOX Business' Chris Pandolofo contributed to this report.