Tech office leasing is on track to tick up this year in San Francisco, but retains less than half its strength compared to the pre-pandemic economy.
This year, tech office leasing in San Francisco reached 3 million square feet, short of last year’s 3.08 million square feet, but remains a shadow of its former self, the San Francisco Business Times reported, citing figures from CBRE.
In 2019, tech companies leased 6.2 million square feet of offices across the city. After a tech-led shift to remote work at the dawn of the pandemic in 2020, tech leasing plunged to 820,000 square feet.
It has been a long climb back, with special credit given to a boomlet of leases by artificial intelligence firms. Overall, 37.3 percent of all the offices in San Francisco stand empty.
Year-to-date, tech leasing accounted for 47 percent of all leasing activity in San Francisco, shy of 50.5 percent of all leasing last year. In the six weeks left until New Year’s Day, tech leasing could surpass last year’s share.
Colin Yasukochi, head of CBRE Group’s Tech Insights Center, was optimistic.
“2024 will be the highest year of leasing by tech companies since 2019,” he told the Business Times.
Artificial intelligence has come on strong, with outgoing Mayor London Breed calling San Francisco the “AI capital of the world.”
San Francisco and Silicon Valley were the most active U.S. markets for AI leasing in the third quarter, according to CBRE. The Bay Area snagged 76 percent of all AI venture capital funding in the first half of the year.
Over the past five years, AI companies leased 3.9 million square feet in San Francisco and 2.6 million square feet in Silicon Valley.
“It’s pretty clear that the worst is behind us in terms of demand fundamentals in the San Francisco office market,” Max Saia, vice president of investor research at VTS, told the Business Times.
“I think people are looking at San Francisco and saying, ‘Hey, that looks like it’s getting meaningfully better.’”
Across the U.S., tech companies leased 9.9 million square feet of offices in the third quarter, up from 8 million in the previous period and the highest level since the end of 2021.
— Dana Bartholomew
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