San Francisco's office market has shown its first signs of recovery after nearly five years, as the vacancy rate for office spaces dropped slightly to 34.5%. This decrease, however small, is significant as it marks the first decline since the onset of the COVID-19 pandemic. Both JLL and Colliers reflected this trend, suggesting that the demand from tech and AI companies has begun to influence the market favorably.
JLL's Alexander Quinn noted, 'A lot of the move-outs have already occurred,' indicating that the worst of the empty office space crisis in the city might be behind it. Though he cautioned that the vacancy rate could rise again in early 2024 as existing leases expire, he expressed optimism for recovery in the latter half of the year, suggesting a gradual return to normalcy in the market.
The demand for office space has been notably driven by tech and AI firms, with over 1 million square feet leased by AI companies alone. JLL predicts a total of 6.8 million square feet will be leased in San Francisco throughout 2024, maintaining levels similar to those seen during 2021 and 2022 but still a significant decline from pre-pandemic leasing activity, which exceeded 12 million square feet.
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