After the pandemic turned San Francisco’s once-bustling offices into a ghost town, the city’s office market is humming back to life.
The amount of office space that was vacant or available for lease decreased by nearly 2 million square feet in the fourth quarter of last year, the San Francisco Business Times reported, citing data from CoStar Group. The change marks the steepest drop in office availability in four consecutive quarters of decline in availability.
Companies leased upwards of 1 million more square feet than they vacated in the fourth quarter, representing the largest such instance of positive absorption since 2018, per CBRE data cited by the Business Times. Since reaching a peak in late 2024, office availability has fallen by approximately 5 million square feet.
Artificial intelligence and tech companies are being credited with the uptick in occupancy. AI startup Sierra inked the largest lease deal of the year in San Francisco, 300,000 square feet at 185 Berry Street in China Basin. AI-focused companies account for about 2.8 million square feet of the approximately 8 million square feet of offices that firms are currently searching for in San Francisco, according to CBRE data cited by the Business Times.
While office occupancy in San Francisco is trending in a positive direction, the city still has a long road to complete recovery. About 24 percent of office space in San Francisco is empty or available for lease — the highest share in the U.S. and roughly three times the availability rate in the city in 2019, per CoStar.
Demand for office space from AI companies is expected to continue driving down office availability in the coming years. AI entities are predicted to take up as much as 21 million square feet of offices in San Francisco by 2030, CBRE said last year. Company headcounts are also expected to grow, with the hiring frenzy expected to bring between 50,000 and 60,000 new jobs to the city by the turn of the next decade. — Chris Malone Méndez
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