San Francisco’s office market showed signs of recovery in 2025, driven in large part by leasing from artificial intelligence companies, according to BisNow. Tenants absorbed roughly 1 million square feet in the third quarter alone, marking the fifth consecutive quarter of net positive absorption.
The city’s vacancy rate fell 3.7% over the year, the steepest annual decline since 2011, according to CBRE data.
Major AI tenants, including Sierra AI, OpenAI, and Nvidia, signed leases that underscored the sector’s influence on office demand.
Smaller, High-Quality Spaces Lead Demand
Unlike the city’s 2010s tech boom, where companies like Google, Meta, and Salesforce leased entire towers, today’s tenants are seeking smaller spaces with turnkey improvements.
Firms such as Kirkland & Ellis, DocuSign, Carta, and Ouraring have either renewed leases or relocated to high-quality offices downtown.
Brokers note that AI and frontier tech companies often require spaces ready within 12 to 24 months, reflecting an urgency absent in previous cycles.
Developers and Investors Return
Early-stage development activity is picking up as major players reenter the market. Hines filed permits for a potential 1,225-foot tower at 77 Beale Street, while Lincoln Property Co. and McCourt Partners are exploring redevelopment of the former Golden Gate University campus at 536 Mission Street.
Institutional investors are also showing renewed interest, signaling confidence in the market’s long-term potential despite elevated interest rates and leasing risks.
Construction Activity Remains Cautious
While inquiries from developers are rising, construction remains largely contingent on securing tenant commitments, but increased pricing requests indicate interest but do not necessarily guarantee project launches.
Developers — particularly smaller firms — are exploring financing options, though serious execution is concentrated among larger, institutional players.
Market Outlook
San Francisco’s office market is not short on space, but demand is concentrated on modern, well-located offices with minimal retrofit requirements. Now, brokers and developers expect momentum to continue, with AI tenants and high-quality offerings shaping the recovery.
