San Francisco’s mountain of pandemic-era office subleases is finally starting to erode, and it is not law firms or banks doing the chipping. A new wave of AI startups is quietly taking down some of the city’s choicest blocks of space, including Meta’s former offices at 181 Fremont.
Perplexity moves into 181 Fremont
According to CoStar, AI firm Perplexity has subleased space at 181 Fremont in SoMa. The deal carves out a significant chunk of Meta’s former footprint in the tower and, as CoStar reports, is part of a broader run of AI companies snapping up subleased blocks across the city this year.
Sublease inventory is finally shrinking
Brokerage numbers suggest those deals are starting to show up in the stats. After years of swelling supply, sublease availability in San Francisco has begun to fall: Cushman & Wakefield reports the city has shed roughly 1.5 million square feet of sublease space in recent quarters. The firm also notes that, nationwide, sublease stock is down by about 20 percent from an early-2024 peak.
Big AI deals are doing the heavy lifting
A relatively small set of large AI-driven transactions is doing much of the work. The San Francisco Chronicle reported that Scale AI took roughly 170,000 to 180,000 square feet at 650 Townsend. Other headline moves include Adyen’s 150,000-square-foot sublease at 505 Brannan and Zendesk’s roughly 40,000-square-foot deal at 181 Fremont, according to The Real Deal.
Why AI companies prefer subleases
Behind the scenes, the strategy is pretty simple. Younger AI firms are prioritizing speed and flexibility: short, plug-and-play subleases let them move in quickly and adjust their headcounts without being locked into long commitments. Commercial Property Executive notes that many AI leases skew toward three-year terms and that a large share of recent AI office deals have been structured as subleases.
What landlords and neighborhoods are seeing
Landlords holding trophy, Class A buildings are feeling the benefits first. As tenants follow a flight to quality, demand is clustering in newer towers with large floorplates. Cushman & Wakefield reports that Class A space is outperforming the rest of the market on absorption, a pattern that could support more consistent downtown foot traffic and healthier retail sales if it continues.
Even so, market watchers caution that AI leasing has only shaved the edges off a record vacancy rate rather than solved it. Brokers describe the recent AI deals as a welcome, highly localized boost - not a full recovery. For San Francisco’s swollen sublease inventory to truly clear, the city will need broader, sustained demand that goes well beyond this first wave of AI tenants.
