A billboard funded by Airbnb shows opposition to Proposition F in downtown San Francisco, California.A billboard funded by Airbnb shows opposition to Proposition F in downtown San Francisco, California.

Thanks to government money and a lot of debt, the downtown San Francisco office of Marshall Luck is still open. His business is only back to 70% of its pre-pandemic level after two years.

Like many of his small business neighbors, Luck has been waiting for San Francisco to bounce back. He relies on tech workers at large employers, which is a challenge because they are being flexible with their return-to-office demands.

While big cities across the country struggle to fully recover from the Pandemic, San Francisco is on another level, as tech companies exit lease and residents bolt for more affordable locations. One-third of San Francisco's workforce is now remote and outside of the city, according to the mayor's office. The $400 million hit to tax revenue was caused by that.

There is some life in the downtown area. The area has more foot traffic, fewer stores are boarded up, and some restaurants and cafes have been replaced with new tenants. Merchants like Luck are stuck in a fog of uncertainty, hoping that workers will eventually come back.

In an interview with CNBC, Luck said that most of the patient population is the larger businesses. We are hanging on for that recovery.

The truth is that Covid isn't going away. The US has reported an average of 126,000 cases per day since the omicron BA.4 and BA.5 subvariants were added.

San Francisco Mayor London Breed speaks at a press conference regarding the next steps she will be taking to replace three school board members who were successfully recalled at City Hall on Wednesday, Feb. 16, 2022 in San Francisco, California.

Commuters who use public transportation prefer to stay home. Bay Area Rapid Transit had an average of over 400,000 daily riders in 2019. The number had gone up to 136,000 per weekday by the end of May.

We still wear masks in our office, which is a very present thing to us.

Real estate and transportation data are related. The office vacancies in San Francisco increased to 24.2% in the second quarter from 23.8% in the first. San Francisco is below other major cities.

Manhattan hit an all-time high in the third quarter. Atlanta is at 22.8%, Chicago is at 21.2%, Los Angeles is at 22%, and Seattle is at 20%.

Robert Sammons, regional director of the research team in the Northwest, said that we are slower than New York and Chicago because we are so reliant on tech.

Most employees want some level of work from home as they return to the office, and a lot of employers are giving that as an option, according to Mayor Breed.

Last week, the largest employer in San Francisco said it was cutting its office space in the city again, and is now listing 40% of a 43-story building that is across the street from the mainSalesforce Tower. Last year, the San Francisco office of Coinbase was closed, and the return of the company to office was delayed. Companies that reopened did so with optional attendance.

One of the more vocal companies in tech when it comes to getting staff back to work has retreated. The company made a record profit last year. Most of the requests for relocation or permanent remote work have been approved by leadership.

San Francisco commercial real estate properties have fallen to between 30% and 40% below their pre-pandemic prices, and tech companies are feeling the pain.

Flexport has a centrally located office on Market Street that used to house 500 employees but hasn't been able to find a new tenant in more than two years.

Bill Hansen, Flexport's global head of real estate, said that they haven't been able to get a deal done because of the fierce competition on the sub lease market.

Flexport founder and outgoing CEO Ryan Petersen told CNBC that the company couldn't find someone to take the office The space is great, we just signed at high rates, and the market was soft through Covid.

The food court at the downtown Rincon Center is mostly empty except for a couple longstanding tenants. Cafe Elena is the only vendor on the other side of the street. Since March 2020, there have been no lights on at the other five. One Market is home to a number of companies.

Colin Yasukochi said that everyone is losing out.

The Salesforce Tower, left, and the Salesforce West office building in San Francisco, California, U.S., on Tuesday, Feb. 23, 2021.

There is more to San Francisco real estate than meets the eye. Records are being set for high-end spaces.

The East tower was listed by the company last year. Real estate experts said the deals were expensive. The Sobrato organization paid a record amount for a building in San Francisco's South of Market neighborhood.

Sammons said that employers will have to offer more incentives for workers to come back and that it can't be just a snack bar anymore. Transactions are being done to prepare for that future.

Sammons said that big tech companies are taking advantage of the market and that they will need it down the road. The kind of companies that have funds ready to do that are the ones that they are.

The downtown area's real estate market is expected to recover in the next two decades. There is no guarantee that San Francisco and the surrounding cities in the East Bay and Silicon Valley will make a full recovery.

Mortgages with million-dollar-plus prices are even more expensive now that interest rates are jumping.

With no solution to the region's affordable housing crisis in sight, local firms will have a hard time convincing graduates to stay in the region.

It will be more of a challenge to convince workers from other areas to move to the Bay Area. The Bay Area still has the most complete tech ecosystems in the world despite the fact that many companies have expanded or relocated outside the region.

The world of work has changed and Mayor Breed acknowledges that. She wants San Francisco to help with a revival.

A lot of the things that people would want to visit a major city for is what we have to also focus on. It's going to be a challenge to work in the office.

Real estate contracts will end in the next year or so, which could cause more turmoil in the market. It is likely that landlords will have to offer better terms to tenants who are considering walking away.

Some small businesses have worked up revenue sharing deals with landlords to lighten the upfront costs. Sammons said that sharing spaces with other tenants is a whole new world in some ways.

Business is operating in a way that is uncomfortable. He said he will be paying off his loans for the rest of his life, after cutting his staff and relying on loans.

He expects history to repeat itself after seeing down cycles before.

He has been through the dot-com bust. It happens and they also recover eventually. It could be a more diverse population of businesses in a few years.

CNBC had a contributor to this report.

San Francisco Mayor London Breed was interviewed by CNBC.