San Francisco’s once rock-solid medical office market felt a little shakier in the first quarter of 2026, as vacancy nudged up to 10.5 percent and net absorption flipped to negative 48,700 square feet after several quarters of relative stability. Total inventory remained roughly 8.39 million square feet, with no new purpose-built medical office completions during the period. It is a reminder that even the healthcare-focused side of the office world, often billed as a safer bet than traditional office, can wobble when leasing slows.
According to CoStar, vacancy in San Francisco medical office space rose from 9.9 percent in the fourth quarter of 2025 to 10.5 percent in the first quarter of 2026, while net absorption slid to -48,700 square feet. CoStar’s coverage today also notes that total inventory remained at about 8.39 million square feet and that the quarter saw no new medical office deliveries.
How This Compares To Broader Trends
Even with a soft patch, medical office space continues to draw investors and tenants, helped by demand from hospitals, outpatient expansions and an aging population that is not getting any younger. CBRE reported a notable rise in medical office building investment activity in 2025, while broker research from Colliers finds healthcare real estate fundamentals holding steadier than the broader office market. Those structural supports help explain why medical office vacancy has generally stayed lower than generic office vacancy in most markets.
Local Office Backdrop
San Francisco’s overall office picture has been showing a selective rebound, with performance varying sharply by submarket. That patchwork recovery feeds directly into demand for medical space near hospitals, clinics and key transit nodes. Cushman & Wakefield points to improving leasing momentum in leading markets and highlights a multi-quarter recovery of absorption for San Francisco. In practice, that likely means high-quality medical buildings clustered around major care centers should stay relatively tight, while older or more out-of-the-way properties could be staring at longer vacancy stretches.
What To Watch
Large hospital projects and campus upgrades can quickly change the math for nearby outpatient clinics and support space. UCSF’s new Helen Diller Hospital at Parnassus is a long-lead project whose construction is expected to reshape leasing dynamics in the surrounding area as it progresses. UCSF details work in monthly construction updates. National trackers also forecast that medical office demand should remain relatively durable into 2026, even if quarter-to-quarter swings show up in the numbers, reflecting the sector’s broader structural tailwinds.
The first-quarter vacancy uptick does not amount to a full-on market breakdown, but it underscores how sensitive leasing and investment timing can be in this niche corner of commercial real estate. For a subscriber-only breakdown of the quarter’s figures, see CoStar.
