Downtown San Francisco’s office market is improving, according to data from CBRE that shows the lowest vacancy rate in years.
Jessica Christian/The Chronicle
Databricks has doubled down on San Francisco, with the tech company expanding its office footprint at 1 Sansome St. by 90,000 square feet as a resurgent office market — now increasingly powered by artificial intelligence tenants — shows its strongest momentum in years.
The expansion comes roughly a year after Databricks committed to a long-term, 150,000 square-foot lease at the Financial District tower, and lands amid a first quarter surging demand for downtown offices, tightening availability in top-tier buildings and a record run of triple digit rents, according to preliminary market data for the first months of the year first provided real estate brokerage CBRE.
For years, downtown office vacancy has hovered in the mid-30% range, a historic high resulting from the pandemic-era shift to remote work, a wave of sublease space hitting the market as many companies downsized and muted leasing activity from the city’s once-dominant tech sector.
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Now, there are early signs of a turn: CBRE reports vacancy has edged down to 30.8% in the first quarter, a notable improvement from 33.5% in the last quarter of 2025. The number is driven by renewed demand, which the firm has quantified as tenants in the market that are collectively searching for 8.2 million square feet of office space.
That’s still a ton of empty offices with no takers. Yet, things are looking up: So far in the first quarter, net absorption — a key measure of whether companies are taking more space than they are giving back — has turned positive, reaching more than 1.8 million square feet, according to CBRE. That marks a meaningful shift for a market that, as previously reported by the Chronicle, has spent much of the past several years mired in negative absorption as tenants downsized or exited offices altogether.
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The total amount of office space leased in recent months is roughly 3 million square feet, of which more than half was claimed by AI tenants, the firm reported.
“The San Francisco office market recorded the highest quarterly net absorption figure in its history,” said Colin Yasukochi, executive director of CBRE’s Tech Insights Center. “That dropped vacancy by two percentage points to 30.8% compared to Q4 2025. Since demand turned positive in Q4 2024, more than 4.4 million square feet has been newly occupied, mostly by AI tenants.”
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Databricks’ expansion at 1 Sansome ranks among the five largest lease transactions of the quarter, bringing its total downtown San Francisco footprint to roughly 240,000 square feet. The company is also scaling up in Silicon Valley, having signed a separate 330,000-square-foot expansion in Sunnyvale, according to a spokesperson.
That deal grew its footprint in that region to roughly 635,000 square feet and coincided with strong business momentum, with the company reporting a $5.4 billion revenue run rate at the end of January — up more than 65% year over year. The company has over 10,000 employees in the Bay Area.
“We’re thrilled to be roughly doubling our Bay Area footprint, with major space increases in both San Francisco and Sunnyvale,” said Patrick Wendell, Databricks’ co-founder and vice president of engineering, in a statement. “The rise of AI has dramatically accelerated our business, and we are happy to be investing here to fund our continued growth.”
Other notable San Francisco lease deals completed in the first leg of 2026 include AI industry titans Anthropic taking over an entire, 480-square-foot building at 300 Howard St. and OpenAI completing a long-anticipated sublease deal at 1800 Owens St. in Mission Bay; Atlassian renewing an existing lease at 350 Bush St. for 125,000 square feet, in spite of the news Tuesday that the company cut more than 200 jobs in the city; and Charles Schwab signing a new, 115,000-square-foot lease at 425 Market St.
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On top of these developments, rental rates appear to be rebounding in the city’s top office towers. According to CBRE, 46 leases were signed in the first quarter of the year with rents of $100 per square foot or more, which exceeds all of 2025 and is also the “highest level since at least 2015,” Yasukochi said. In January, real estate market participants celebrated a record shattering deal at the Transamerica Pyramid, where a 4,000-square-foot office was leased to a venture capital firm for over $300 per square foot.
“As AI companies continue to grow and raise additional funding, the office market is likely to maintain high demand that will further lower vacancies, increase rents and potentially kick-off new development in the next 12 months,” Yasukochi said.