San Francisco Office Absorption Plunged in Late 2022

San Francisco’s office market collapsed in late 2022 as brutal layoffs in the tech sector led to a wave of downsizing.

The Big Tech pullback is reverberating in markets across the country, but the Bay Area has been the inevitable epicenter of the resulting officequake.

The vacancy rate jumped 4.2 percent year-over-year in the fourth quarter of last year, reaching more than 24 percent, according to data from Cushman & Wakefield. Net absorption saw an even more dramatic shift, plunging by a staggering 1,150 percent since the end of 2021, dropping to -1.4 million square feet.

The start of 2023 suggests the commercial carnage isn’t over. In January, Salesforce — San Francisco’s largest private employer and occupant of its tallest building — announced layoffs and a shrinking office footprint. Salesforce said in a regulatory filing that it expects to pay between $450 million and $650 million in charges tied to “select real estate exits and office space reductions within certain markets.”

Last month, Salesforce subsidiary Slack announced plans to move in with its parent company in the Salesforce Tower, vacating its 250,000-square-foot headquarters in SoMa.

Of the top 12 leases signed in the final quarter of 2022, only five were new deals. Convene’s 65,413-square-foot lease at 100 Stockton Street in Union Square was the largest new lease inked in that period.

But hope springs eternal in real estate, so developers are still willing to plow money into new Bay Area office space. There are even starry-eyed startups dreaming of reviving San Francisco’s downtrodden Financial District.

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