OpenAI Subleases 350K sf Building in SF’s Mission Bay

OpenAI plans to occupy a 315,000-square-foot building that once served as Old Navy’s headquarters in San Francisco’s Mission Bay, bringing its office footprint to nearly 1 million square feet.

The locally based artificial intelligence firm has subleased the six-story office building at 550 Terry Francois Boulevard, the San Francisco Standard reported. Terms of the deal with owner DivcoWest were not disclosed.

The deal comes a year after the creator of ChatGPT subleased 486,600 square feet of offices from Uber in two buildings at 1455 and 1515 Third Street, in Mission Bay.

It also marks the biggest office lease of the year, an unidentified source familiar with the deal told the Standard.

The combined leases widen OpenAI’s office footprint within its home base to nearly 1 million square feet, which includes several smaller offices in the Mission. The new deal was first reported by the San Francisco Business Times.

The new sublease could put a dent in the city’s record number of empty office buildings, which hit a record 37.3 percent this month, according to preliminary figures from CBRE.

Office availability, or office space ready to lease, remained stable at 39.1 percent between the second and third quarters ending this month, suggesting the city’s office market may be at or near peak vacancy.

DivcoWest, based in the city, bought the former Old Navy hub from parent company Gap in 2022 for $356 million, or $1,130 per square foot, with plans to revamp the now 20-year-old building for life science tenants.

The OpenAI deal raises the total AI footprint in San Francisco to 4.7 million square feet, from 4.3 million square feet, according to JLL, which put 15 percent of all office deals this year in the AI industry camp.

With the exception of a few big deals, most office leasing activity in San Francisco over the last year has landed in the 3,000 to 20,000 square foot range, according to Avison Young.

In April, OpenAI had considered the Old Navy location, while also hunting for offices in Silicon Valley as it pursued another 400,000 square feet of workplace cubicles. The Golden State Warriors had also expressed interest in the building, according to the Business Times.

San Francisco Mayor London Breed dubbed her city “the AI capital of the world,” after AI firms leased dozens of offices in the Financial District, South Beach, South of Market and on the edge of the Mission District.

Later San Jose Mayor Matt Mahan mounted a challenge to that claim, urging city agencies to roll out a welcome mat for AI firms. Last year, Silicon Valley accounted for more than half of artificial intelligence tenant demand across the Bay Area, according to Cushman & Wakefield.

— Dana Bartholomew