Bay Area/ San Francisco/ Real Estate & Development
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Published on March 23, 2024
San Francisco Office Market Struggles with Record-High 36.6% Vacancy Rates Despite Economic OptimismSource: Kevin P. Siu, CC BY-SA 3.0, via Wikimedia Commons

San Francisco's already shaky office market just can’t seem to find the ladder out of its slump, with a debilitating vacancy rate now surging to 36.6%, according to the latest data from commercial real estate heavyweight CBRE. This figure is a sizeable leap from the 35.6% seen in the fourth quarter of 2023 and a staggering nine times larger than the 4% it languished at three years ago when the pandemic was just beginning its global toe-dip.

Once an iridescent dot on the tech and commercial map, the City by the Bay is grappling with its highest office vacancy levels ever. While rents have plummeted by 1.3% to $68.35 per square foot year on year, they remain among the priciest in the nation, which, coupled with a flat 45% return to office rate, hasn't exactly been a siren's call for businesses, according to CBRE's figures reported by the San Francisco Chronicle.

Despite what seems like a bottomless pit of empty office spaces, certain quarters are betting on a brighter future for San Francisco’s corporate landscape, "The San Francisco office market is beginning to transition out of its four-year downturn, while it will take many years to rebalance supply and demand, we are starting to see positive signs," said Colin Yasukochi, executive director of CBRE's Tech Insights Center, in a statement obtained by SFGATE.

And there's more to the story than just yawning vacancies, as the scene appears to be set for a potential revival with 6 million square feet of office space now being sought after—up from 4.2 million in the last quarter and paintings a more hopeful picture against the backdrop of last year’s meek demand. AI companies made up 28% of leasing activity at this time.

Moving away from mere speculation, tangible deals have started to ink the pages of the office market story this year as fintech firm Adyen locked down a 150,000-square-foot sublease, and blue-chip players like KPMG and Bank of America not only renew leases but continue to exhibit their trust in San Francisco's resilience; meanwhile, a Warren Buffet-inspired investor is reportedly looking to snatch up millions in office space downtown.

Yasukochi told the San Francisco Chronicle, "Additional mandates are unlikely to increase office attendance materially at this point, but rather a booming economy will compel more people to want to be in the office and be better connected to the next growth cycle."