Adept AI Labs to Lease 35K sf in San Francisco’s “Area AI”

It’s not the catchiest phrase. But a new section of San Francisco dubbed “Area AI” has drawn at least one more artificial intelligence firm to the Mission District, western SoMa and Potrero Hill.

Adept AI Labs is about to lease 35,000 square feet at 350 Rhode Island Street, the San Francisco Business Times reported, citing unidentified sources. Terms of the deal, expected to close this week, were not disclosed.

It’s not clear whether the San Francisco-based startup will consolidate its two other offices at 660 Alabama Street in the Mission and at 375 Alabama Street nearby. In March, the company that started early last year raised $350 million in a Series B round, bringing its total to $415 million.

With its new fourth-floor office, Adept will join AI and traditional tech companies, including Together, Fyusion, Numerate, PagerDuty, Adobe and Samsara.

Of the 80 AI companies cited by JLL in San Francisco, two dozen now operate within Area AI.

The increased demand from AI companies could come as a boon to office landlords whose vacancies have shot up to 33 percent, according to one estimate, during the era of remote work.

But while the city’s downtown has empty offices for the taking, some AI firms seem to prefer buildings not zoned for offices.

Many AI startups want to set up shop in industrial parts of town, in buildings zoned for manufacturing, according to brokers and landlords hoping to profit from the AI boom.

Many of the buildings within Area AI are zoned for production, distribution and repair, and are off limits to office tenants, according to the Business Times.

But city officials say they are taking a case-by-case approach to determine whether AI companies — which can have production, manufacturing or lab components— can operate in those buildings.

Mayor London Breed has declared San Francisco “the AI capital of the world” — and the robots have begun to fill its empty offices.

In June, Hive subleased 60,000 square feet for a new headquarters at 100 First Street, in the Financial District. At the same time, Tome leased 17,000 square feet at 600 Townsend Street and Chef Robotics in April leased 11,000 square feet at 976 Mission Street.

The Hive sublease marked the largest AI deal since OpenAI leased nearly 100,000 square feet in the Mission District in late 2020, according to the Business Times.

— Dana Bartholomew