Two-Thirds of San Francisco Offices Selling for Lower Prices

San Francisco is near the top of the list when it comes to office buildings selling for significantly lower prices.

About 67 percent of office properties in San Francisco have sold for less than their previous sale prices over the past two years, the San Francisco Business Times reported, citing Yardi Research data. The city was only outdone by Houston, Texas. The national average for offices going for less than their former sale prices is 42 percent.

San Francisco maintains the highest office vacancy in the nation with nearly 35 percent of offices sitting empty, according to the Business Times. While it’s improved a bit as more tenants seek office space, it’s still the highest rate in the country.

By the end of last month, the Bay Area notched more than $3 billion in office sales over the two-year period, becoming one of only three markets to reach that level nationwide alongside Manhattan and Washington, D.C. From coast to coast, more than 3,200 office properties with at least two prior sales have been sold since 2023. With the future of office demand still uncertain, some buyers across the Bay Area have been looking toward adaptive reuse and redevelopment.

Sales prices have settled around $200 per square foot on average in San Francisco, less than a quarter of the city’s pre-pandemic peak.

The artificial intelligence boom could end up being the San Francisco office market’s savior, according to recent reports from CBRE and Colliers.

In the five years since the pandemic, AI-driven leasing activity has increased sevenfold, per Colliers data cited by the Business Times. AI companies could grow from their current footprint of about 5 million square feet across the city to 21 million by 2030, in turn slashing the city’s current office vacancy rate in half, according to CBRE.

AI firms have continued gobbling up office space in San Francisco and across the Bay Area over the past few months.

Last month, AI-powered data company Databricks leased 305,000 square feet in Sunnyvale to complement its new 150,000-square-foot headquarters in San Francisco. Skild AI similarly planted a flag in San Mateo, while Palo Alto-based Glean nabbed an additional 45,000 square feet in San Francisco. Earlier this month, software automation startup Resolve AI committed to 37,000 square feet in San Francisco’s Potrero Hill neighborhood.

— Chris Malone Méndez