There's one bright spot for San Francisco's office space market

SAN FRANCISCO — In caller years, San Francisco’s representation arsenic a welcoming spot for businesses has taken a hit.

Major tech companies specified arsenic Dropbox and Salesforce reduced footprints successful the metropolis by subleasing bureau space, portion retailers including Nordstrom and Anthropologie pulled retired of downtown. Social media steadfast X, formerly Twitter, vacated its Mid-Market office for Texas, aft proprietor Elon Musk complained astir “dodging gangs of convulsive cause addicts conscionable to get successful and retired of the building.”

While the metropolis remains connected the defensive, 1 agleam spot has been a roar successful artificial quality startups.

San Francisco’s 35.4% vacancy complaint successful the archetypal 4th — among the highest successful the federation — is expected to driblet 1 to 3 percent points successful the 3rd 4th acknowledgment to AI companies expanding oregon opening caller offices successful the city, according to existent property brokerage steadfast JLL. The past clip San Francisco’s vacancy complaint dropped was successful the 4th quarter, erstwhile it declined 0.2% — the archetypal clip since the COVID-19 pandemic, according to JLL.

“People wanted to number america out, and I deliberation that was a atrocious bet,” said Mayor Daniel Lurie. “We’re seeing each of this due to the fact that the ecosystem is amended present successful San Francisco than anyplace other successful the world, and it’s truly an breathtaking time.”

Five years ago, AI leases successful San Francisco’s commercialized existent property marketplace were comparatively sparse, with conscionable 2 leases successful 2020, according to JLL. But that’s since soared to 167 leases successful the archetypal 4th of 2025. The bureau footprint for AI companies has besides surged, making up 4.8 cardinal quadrate feet successful 2024, up from 2.6 cardinal successful 2022, JLL said.

“You request the endowment base, you request the entrepreneur ecosystem, and you request the VC ecosystem,” said Alexander Quinn, elder manager of economical probe for JLL’s Northwest region. “So each those 3 things beryllium wrong the greater Bay Area, and that enables america to beryllium the wide leader.”

AI firms are attracted to San Francisco due to the fact that of the attraction of endowment successful the city, analysts said. The metropolis is location to AI companies including ChatGPT shaper OpenAI and Anthropic, known for the chatbot Claude, which successful crook pull businesses that privation to collaborate. The Bay Area is besides location to universities that pull entrepreneurs and researchers, including UC Berkeley, UC San Francisco and Stanford University.

Venture superior companies are pouring wealth into AI, fueling bureau and unit growth. OpenAI landed past 4th the world’s largest task superior deal, raising $40 billion, according to probe steadfast CB Insights.

OpenAI leases astir 1 cardinal quadrate feet of abstraction crossed 5 antithetic locations successful the metropolis and employs astir 2,000 radical successful San Francisco. The institution earlier this twelvemonth opened its caller office successful Mission Bay, leasing the abstraction from Uber.

OpenAI began arsenic a nonprofit probe laboratory successful 2015 and the radical progressive recovered their mode to San Francisco for the aforesaid crushed wherefore earlier generations of technologists and radical pushing the frontier successful the United States are drawn to the city, said Chris Lehane, OpenAI’s vice president of planetary affairs successful an interview.

“It is simply a spot where, erstwhile you enactment retired an idea, nary substance however brainsick it whitethorn look astatine the time, oregon however unorthodox it whitethorn look ... San Francisco is the metropolis wherever radical don’t say, ‘That’s crazy,’” Lehane said. “They say, ‘That’s a truly absorbing idea. Let’s spot if we tin bash it.’”

Databricks, valued astatine $62 billion, is besides expanding successful San Francisco. Databricks successful March announced it volition determination to a larger abstraction successful the Financial District adjacent year, boosting its bureau footprint to 150,000 quadrate feet and much than doubling its San Francisco unit successful the adjacent 2 years. It pledged to clasp its yearly Data + AI Summit successful the metropolis for 5 much years.

The institution holds 57,934 quadrate feet astatine its existent San Francisco bureau adjacent the Embarcadero, according to CoStar, which tracks existent property trends.

“San Francisco is simply a existent endowment magnet for AI talent,” said Databricks’ co-founder and vice president of engineering Patrick Wendell. “It’s a beauteous metropolis for radical to unrecorded and enactment successful and truthful we truly are conscionable pursuing wherever the employees are.”

Several years ago, Wendell said his institution was considering whether to grow successful San Francisco. At the time, it was unclear whether radical would instrumentality to offices aft the pandemic, and immoderate businesses raised concerns astir information and cleanliness of San Francisco’s streets. Wendell said his institution decided to put much successful the metropolis aft getting reassurances from metropolis leaders.

“People are seeing an medication that is focused connected nationalist safety, cleanable streets and creating the conditions that besides says that we’re unfastened for business,” said Lurie, who defeated incumbent politician London Breed past November by campaigning connected nationalist safety. “We’ve said from time one, we person to make the conditions for our arts and culture, for our tiny businesses and for our innovators and our entrepreneurs to thrive here.”

Laurel Arvanitidis, manager of concern improvement for San Francisco’s Office of Economic and Workforce Development, said that the city’s argumentation and taxation reforms person helped pull and clasp businesses successful caller years, including an bureau taxation recognition that gives up to a $1-million recognition for businesses that are caller oregon relocating to San Francisco.

On Thursday, Lurie announced connected societal media that cryptocurrency speech Coinbase is opening an bureau successful San Francisco aft leaving the metropolis 4 years ago.

“We are excited to reopen an bureau successful SF,” Coinbase Chief Executive Brian Armstrong wrote successful effect to the mayor’s societal media post. “Still tons of enactment to bash to amended the metropolis (it was truthful severely tally for galore years) but your fantabulous enactment has not gone unnoticed, and we greatly admit it.”

Santa Clara-based Nvidia is besides looking for San Francisco bureau space, according to a idiosyncratic acquainted with the substance who declined to beryllium named. The quality was archetypal reported by the San Francisco Chronicle. Nvidia, which besides has California offices successful San Dimas and Sunnyvale, declined to comment.

“It’s due to the fact that of AI that San Francisco is back,” Nvidia Chief Executive Jensen Huang said past period connected the Hill & Valley Forum podcast. “Just astir everybody evacuated San Francisco. Now it’s thriving again.”

But San Francisco inactive has challenges ahead, arsenic companies proceed to propulsion workers to instrumentality to the office. While the thoroughfare situation has improved, it volition beryllium captious for the metropolis to support up the progress.

Lurie said his medication inherited the largest fund shortage successful the city’s past and they person to get that nether control. His administration’s task is to marque definite streets and nationalist spaces are clean, harmless and inviting, helium said.

“We person enactment to do, there’s nary question, but we are a metropolis connected the rise, that’s for sure,” Lurie said.

Times unit writer Roger Vincent contributed to this report.