Weekend Interview: The Swig Co. CEO Connor Kidd On Why San Francisco's Recovery Begins Now

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

Connor Kidd moved to the Bay Area from Oklahoma as an undergrad student at Stanford University and never looked back. As the recently appointed CEO of The Swig Co., he’s also never turned his back on San Francisco and the long-term value he believes its real estate has. The Swig Co. is a real estate investment and development firm based in San Francisco, founded in 1936 by Benjamin Swig.

Since then, the company has grown strong roots in downtown San Francisco and Silicon Valley while diversifying into office and multifamily assets across the Bay Area, Los Angeles, Seattle and New York City. It maintains a conservative, long-term investing approach to its 7.5M SF portfolio. 

After a meteoric rise for the office market in the 2010s, San Francisco, and particularly its downtown, suffered a deep setback with the coronavirus pandemic. Now, Kidd believes the city sits on the precipice of recovery. 

This interview has been edited for length and clarity.

Bisnow: Last year, you were named CEO of The Swig Co. Tell us a little bit about where you got your start in commercial real estate and what path led you to this new role.

Connor Kidd: I was fortunate to go to Stanford, which brought me to the Bay Area from Oklahoma. While there, I majored in engineering and went into consulting, where I bounced around from project to project. But I never felt tied to one specific thing and wanted to interact with something on a daily basis where I had a stake in its outcome. 

So I decided to go back to business school, again at Stanford, to make a change. My dad worked in real estate, and the sector felt tangible. Plus, I liked being able to interact with what I was working on and get out of the office to visit sites. 

Fortunately, I was able to start working for Swig in 2009. Although the timing wasn’t perfect, I slowly grew with the company. About four years ago, I transitioned to asset management, became president two years ago and CEO last fall.

Bisnow: We are at a pivotal point in San Francisco. In the midst of the ongoing recovery, what is The Swig Co.’s investment strategy? 

Kidd: We believe in the long-term nature of San Francisco and have always been a conservatively managed company. Therefore, we think about multigenerational investments. For example, we acquired our interest in the building we’re sitting in [220 Montgomery St.] back in the 1950s. Generally speaking, when people say “long-term,” they mean longer than five years. For 220 Montgomery, we’re talking about 70-plus years of ownership. 

We have a different horizon and perspective than other investors. That's not to say that we don't look at our returns — we do. From a returns perspective, this long-term view has served us well.

Four or five years ago, buildings were trading from $800 to $1,200 a foot. We recently bought 350 California for roughly $200 a foot, and that seems to now be the bottom. Values have since moved closer to $300 per SF. 

Bisnow: To that end, you've been buying some office buildings in San Francisco and LA, two of the most challenging office markets in the country. Why are you active in these markets?

Kidd: These markets have good economies, good geographies and good locations. Right now, these markets are having challenging moments. But LA and San Francisco will still exist 10 years from now, and people will still want to live here and start businesses that want to remain here. 

Obviously, San Francisco is driven by tech, while movie and TV studios fuel LA’s economy. While there will be ebbs and flows, these cities will continue to create whatever the next big thing is, whether in media or technology. 

Bisnow: Speaking of technology, we hear often these days that AI and tech firms are leading the charge for office space in San Francisco. In your opinion, is AI driving the leasing market? Why or why not?

Kidd: Well, before ChatGPT, local tech companies were working on AI-powered strategies. AI is effectively a predictive engine of a series of things that are going to happen. Facebook, Google and Apple were working with AI before ChatGPT even started. 

AI will continue to expand across a host of companies that utilize this technology. In short, there will be more pure AI companies, but it’s not appropriate to say it’s the only engine driving the market. 

More importantly, technology will continue to reinvent itself. In San Francisco, technology has reemerged as a meaningful driver of leasing activity. 

Bisnow: Bisnow has reported on lease expansions and extensions from law firms and other nontech companies. Are you seeing similar activity from financial services, real estate, insurance companies and other tenants not actively engaged in tech?

Kidd: More traditional tenants are driving the market right now, but tech demand is definitely strong. So that's probably going to drive us for the next six months, six to 12 months. Many of them are trading up into better space because they're trying to get their employees into the building, or quite honestly, it's a great time to get a bargain on an office space. 

At 350 California, we worked on a deal with a law firm and are on the verge of another law firm deal. We renewed a bank’s lease, closed a 16.8K SF deal for climate tech company 9Zero and also leased the 16th floor to nonprofit Bridge Housing.

None of these firms fit the traditional tech moniker, with the exception of 9Zero.

Over the past three years, many companies have downsized in the aftermath of the pandemic. In the last six months, we have had more conversations with companies about expansions. It’s nice to have those conversations where you're actually growing the market as opposed to reshuffling the deck. 

Bisnow: What about leasing demand in other major West Coast metros? 

Kidd: LA is an enormous market, and the actors and writers strikes put a pause on activity. But these projects are finally getting going again.

Seattle also seems like it's more meaningfully behind. Seattle has historically been driven by big tech, like Microsoft and Amazon, and big tech has not been in a place where they're expanding right now. 

Bisnow: What about office-to-residential conversions in San Francisco? There's been some California legislation to spur redevelopment of office buildings, but can developers get these projects built? If so, how effective would they be in absorbing the city's office vacancy, which is above 35%?

Kidd: The way things stand right now, it doesn't make sense to do any of these projects from a numbers perspective. As a result, it doesn’t make a material difference in office vacancy. We either need construction costs to come down, or rents to be higher. 

It's sort of basic: The numbers don't work. While I applaud the efforts the government is making, the fundamental issue is that the costs are too high and the rents don't justify the development of projects going forward.

CORRECTION, JUNE 3, 12:53 P.M. PT: This story has been updated to accurately reflect Connor Kidd's start date at The Swig Co. 

Bisnow: So we can't expect Swig to be an active converter of any of its buildings?

Kidd: Recently, we evaluated one of our buildings. We actually took a pretty deep dive into it and spent quite a bit of money with structural engineering firms. In the end, we saw that something’s going to have to meaningfully change to make office-to-resi conversions make sense. 

Bisnow: What's your bold prediction for the year?

Kidd: San Francisco ends with positive absorption this year, and then vacancy starts to go down. Based on the leasing activity we’re seeing and our recent emergence from the bottom, now's the time to make your deal. If you don’t make it now, it's only going to be more expensive tomorrow, right? 

As a result, I think people are going to start saying, “Okay, let's make the commitment. Let's go forward.”

Bisnow: What is your weekend routine or favorite weekend activity? 

Kidd: Since I have two young kids, my weekend routine typically involves breakfast and then it's off to whatever activity the kids have for the weekend. Whether it's Scouts, baseball, basketball or skiing, my weekends are generally filled with doing stuff with my kids.