{"id":487756,"date":"2026-10-07T06:16:25","date_gmt":"2026-10-07T06:16:25","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/487756\/"},"modified":"2026-10-07T06:16:25","modified_gmt":"2026-10-07T06:16:25","slug":"san-francisco-office-market-climbs-fueling-demand-for-large-blocks-luxury-space","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/487756\/","title":{"rendered":"San Francisco Office Market Climbs, Fueling Demand For Large Blocks, Luxury Space"},"content":{"rendered":"

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Bisnow\/Bora Altunay<\/p>\n

Farella Braun + Martel\u2019s Brent Saldana, Emerald Fund\u2019s Oz Erickson, Ryan\u2019s Nick Fogle and the city of San Francisco\u2019s Leigh Lutenski<\/p>\n

San Francisco<\/a>\u2019s office market is now moving at a clip that outpaces even the early artificial intelligence<\/a> surge, with 12.1M SF leased through the third quarter of 2026, a 49% jump over the same period last year and on track for one of the strongest annual totals in decades.\u00a0<\/p>\n

The city logged another 3.9M SF of leasing activity in Q3, according to Savills<\/a>.<\/p>\n

With tenants increasingly chasing 100K\u2011plus SF blocks and landlords of top\u2011tier assets gaining pricing power, the divide between trophy buildings and the rest of the market is widening, according to panelists at Bisnow\u2019s San Francisco State of the Market.<\/p>\n

\u201cWe’re thinking about discounts or replacement costs, so we’re seeing value within the existing office stock,\u201d said John Meany of Presidio Bay\u2019s acquisitions and development team. \u201cVacancy in the market is down to 28%, but that number is misleading. There’s plenty of stock that we view as being obsolete and candidly will not lease.\u201d<\/p>\n

There\u2019s a clear bifurcation among the city\u2019s office assets. Vacancy among the most desirable Class-A office buildings was around 12% in the second quarter, Avison Young<\/a> reported. Vacancy for Class-B properties, meanwhile, was north of 31%.\u00a0<\/p>\n

Average rents at Class-A office buildings also command a 54% premium over outdated and lower-class office properties. Q3 figures for the individual asset classes aren\u2019t yet available.<\/p>\n

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Bisnow\/Bora Altunay<\/p>\n

Allen Matkins’ Tony Natsis, Pacific Workplace\u2019s Laurent Dhollande, LMNL Studio\u2019s Marcus Guillard, Related Ross\u2019 Greg Kuhlman, Presidio Bay Ventures’ John Meany and MCS Construction\u2019s Dustin Martinoni<\/p>\n

That spread is why the development team at Presidio Bay committed more than $100M to reposition an aging 1967-built office tower at the corners of Spear and Mission streets in the South Financial District into what the firm is calling the country\u2019s first \u201coffice resort.\u201d<\/p>\n

The city is replete with Class-B office buildings that thus far have been passed over by space-hungry AI tenants. Many of these older buildings have a wealth of intrinsic attributes, such as good location, excellent views, preferable window lines or favorable ceiling heights, but they lack the capital stack required to be competitive in the current leasing environment, Meany said.<\/p>\n

\u201cWe find an edge by investing early and investing in spaces and buildings that have those characteristics,\u201d he said at the event, held at Grand Hyatt San Francisco on Sept. 22. \u201cWe saw an opportunity to invest heavily into a product that has these great intrinsic physical attributes. We had the thesis that we could transform it into a Class-A trophy asset that’s competing with the best office product in San Francisco.\u201d<\/p>\n

Companies leasing space today are often seeking luxury workspaces that will help them attract and retain talent. AI companies want well-positioned spaces that allow their workers to remain productive and engaged throughout the day, as well as in the few hours they step away from their desks.<\/p>\n

\u201cThe No. 1 tool of an office building is not the amenities within the building,\u201d said Greg Kuhlman, senior vice president for Related Ross of West Palm Beach. \u201cIt\u2019s everything outside the four walls of the building, whether that’s gyms, coffee shops or places to gather with colleagues. All of these things interact.\u201d<\/p>\n

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Bisnow\/Bora Altunay<\/p>\n

Lubin Olson\u2019s Alex Pugh, Veritas Investments’ Spencer Hogan, Canyon Partners Real Estate\u2019s Scott Swisher, Argosy Real Estate Partners’ David Butler and The Swig Cos.’ Connor Kidd<\/p>\n

Conversions could also begin to chip away at the office vacancy rate among older buildings.<\/p>\n

With multifamily vacancy tightening to 2.4% in Q2, and a limited number of new units in the development queue, developers are expected to take a much closer look at converting the many obsolete office buildings in the city into residential units to meet demand, said Leigh Lutenski, director of development for the city of San Francisco.<\/p>\n

\u201cWe need to weather future cycles by creating downtown as a more mixed-use neighborhood,\u201d Lutenski said. \u201cConversions is one of the major efforts we’re doing to create more people at more times of day, more days of the week, to help supplement the amazing entertainment and culture, and to create that vibrancy that supports our restaurant and retail businesses.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Bisnow\/Bora Altunay Farella Braun + Martel\u2019s Brent Saldana, Emerald Fund\u2019s Oz Erickson, Ryan\u2019s Nick Fogle and the city…\n","protected":false},"author":2,"featured_media":487757,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[190517,79569,190518,101,103,102,104,106,105],"class_list":["post-487756","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-francisco","tag-city-of-san-francisco","tag-presidio-bay-ventures","tag-related-ross","tag-san-francisco","tag-san-francisco-headlines","tag-san-francisco-news","tag-sf","tag-sf-headlines","tag-sf-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/487756","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=487756"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/487756\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/487757"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=487756"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=487756"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=487756"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}