While AI startups are signing large leases, many tech companies, law offices, and consulting firms are reducing their footprint. Companies are looking to relocate to higher quality spaces in more desirable parts of the city due to lower prices and the need to be near amenities to attract staff back to offices. Despite some top employers partially returning to offices, the vacancy rate remains high, particularly in SoMa, where it is almost 50%. The report suggests there may be further room for rents to fall and vacancies to rise.
Key takeaways:
- The vacancy rate for San Francisco office space reached a record 34.5% in the second quarter, up from 33.9% in the first quarter and 5% before the pandemic.
- The average asking rent dropped to $68.27 per square foot in the quarter, the lowest since late 2015, down from a peak of $84.70 in 2020.
- Despite the popularity of AI and startups opening large offices in San Francisco, the city's commercial real estate market is still struggling due to the shift to hybrid work and tech companies reducing their footprint.
- San Francisco's top employers, including Salesforce, Uber, Visa and Wells Fargo, have started bringing employees back to offices part-time, helping the financial district, but the vacancy rate in SoMa, popular with venture-backed startups, is almost 50%.