SF Office Vacancies Remain Stubbornly High

Office vacancy has once again ticked up in San Francisco, with office exits overtaking leasing deals.

Vacancies across the city rose to 36.6 percent in the first quarter ending this month, from 36.5 percent at the close of last year, the San Francisco Chronicle reported, citing figures from CBRE.

Last quarter marked the first time in five years the local office market showed positive net absorption — with more offices leased than became available. Not anymore.

Tenants are vacating more offices than they’re leasing, a trend since a broad shift to remote work during the pandemic.

This week, cybersecurity firm Okta listed more than 70,000 square feet of offices for sublease at 100 First Street, a 27-story office tower where it has leased 14 floors since 2017, an unidentified source told the Chronicle. It’s the second time the firm shed offices since 2021.

At the same time, an office shuttered by Indeed last year at 201 Mission Street also hit the market. The company has since pulled out of San Francisco, according to an unidentified spokesperson.

On a positive note, sublease availability in San Francisco fell 10 percent to 7.1 million square feet this quarter, from 7.9 percent last period, according to CBRE. The surfeit of offices available for sublease has decreased since the beginning of last year, when 8.9 million square feet were available.

Landlords inked more than than 2 million square feet of office leases in the quarter ending March 31, 50 percent more than a year earlier, CBRE determined. But leasing activity so far this quarter fell 20 percent from last quarter, when owners leased out 2.5 million square feet.

Colin Yasukochi, executive director for CBRE’s Tech Insights Center, said office vacancy dipped to 33.8 percent in the Financial District, from 34 percent at the end of last year.

Class A office towers in the north and south Financial Districts were poised to have positive net absorption of 100,000 square feet, according to Colliers.

Derek Daniels, director of research for Colliers, predicted the quarter will likely end with 2.7 million square feet of leases signed.

“There is optimism for the office recovery to continue in 2025 considering increasing … leasing activity. It is expected that capital market activity will pick up as well,” Daniels, referring to building sales, told the Chronicle. “Trends in RTO [to-office] point toward an increasing in-office presence for some of the city’s largest occupiers.”— Dana Bartholomew