San Francisco Office Exodus Slows, But Record Vacancy Rates Still Threaten City’s Future

San Francisco’s office market continues to grapple with the lasting effects of remote work, as vacancy rates reached 36.7% in the first quarter of 2024, according to a report by commercial real estate firm CBRE.  

This increase from the 35.6% vacancy rate in the last four months of 2023 indicates a slowing but persistent downturn in the city’s commercial office sector. 

According to the report, “The market-wide availability rate also increased from 38.5% to 39.1%. This was the smallest increase in both the vacancy rate and availability rate since Q2 2022.” 

The San Francisco Standard reports that big tech firms have largely contributed to the overly sluggish recovery of the office market.  

At the end of 2019, firms such as Meta, Salesforce and Uber leased over 16 million square feet of space in the city. However, updated CBRE data suggests tech firms cut that by nearly half and now hold 8.3 million square feet.  

Akin to other major U.S. metros facing a reduction in leased office space, including Washington D.C., San Francisco’s dramatic situation has implications for the city’s property and business tax revenues.  

According to a report on the data published by Axios, the city’s high vacancies also pose significant challenges to its transit operations. Despite worries, its reported that analysts at CBRE expect leasing activity to increase throughout the next year — partially driven by lease renewals and relocations of employers already based in San Francisco.  

The pandemic has reshaped the country’s relationship with traditional workspaces, and even if start-up industries like AI bring about a slight resurgence in commercial leases, the transition won’t be instantaneous, or smooth. The road to full recovery is expected to be lengthy.