AI Firms Juicing Office Demand in San Francisco

Homegrown Anthropic is looking to ramp up its arms race against OpenAI — not just for the best artificial intelligence technology, but for the most office space in San Francisco.

The Dario Amodei-led firm, hot off a $13 billion Series F round, just added a 100,000-square- feet lease across several floors at the Foundry Square III building in downtown to its footprint in the city.

The new digs are across the street from Anthropic’s current headquarters at Foundry Square IV, where it subleases more than 230,000 square feet from Slack. That deal marked one of the largest local transactions in years, though it clearly trails the AI frontrunner in the physical space race. OpenAI has leased buildings spanning nearly 1 million square feet for its headquarters operations in Mission Bay.

Anthropic’s growth pattern on office space resembles OpenAI, which subleased nearly half a million square feet of offices at 1455 and 1515 Third Street in Mission Bay from Uber in October 2023. The following September, the Sam Altman-led firm grabbed an additional 315,000 square feet next door at 550 Terry A. Francois Boulevard.

When OpenAI celebrated its grand opening of its Mission Bay headquarters in March, executives pledged to double its current San Francisco-based workforce of 2,000 employees.

The influx of AI workers to San Francisco and the Bay Area is expected to bring in more than 50,000 employees in the sector over the next five years, according to experts at CBRE. That’s projected to slash the city’s office vacancy rate in half as tenants in the red-hot sector more than quadruple the amount of office space used by AI firms from 5 million square feet to more than 20 million. Currently, the city faces a 34.6 percent office vacancy rate — reflecting a so-far slow recovery from a peak of 36.9 percent in the third quarter of last year.

A new report from VTS indicates a change of pace, though, with demand more than doubling in the past year. AI companies are expected to accelerate the trend in the coming months. As of last month, there’s been a 107 percent increase in office demand year-over-year in San Francisco. That’s up more than 350 percent since ChatGPT was first released to the public in late 2022, according to the San Francisco Business Times.

Ex-Apple chief takes a bite out of Belvedere

Jony Ive is adding to his Bay Area real estate collection.

The Apple design chief-turned-AI entrepreneur dropped $73 million on four houses in Belvedere. Three of the properties in the bayside Marin County enclave are next to each other at the end of Golden Gate Avenue, while the fourth is nearby on Beach Road. The largest of the homes, boasting five bedrooms, 11 bathrooms and four fireplaces, sold for $43.5 million.

Ive’s purchases come after the Io Products founder spent tens of millions of dollars on nearly a block of property in San Francisco’s Jackson Square neighborhood. The AI device pioneer also owns a mansion in San Francisco’s Pacific Heights.

Historic buildings headed for reimagination

Mayor Daniel Lurie is going back to the future to address San Francisco’s housing crunch.

Lurie’s PermitSF zoning push now includes vacant historic buildings that he sees as ripe for conversion, covering everything from old churches to museum space to hotels.

The mayor introduced legislation that would enable entities such nonprofits, retailers, movie theaters and nightlife operators to set up shop in one of the city’s approximately 300 historic buildings without having to endure lengthy approval processes. It’s part of Lurie’s endeavor to spur redevelopment of private spaces by cutting red tape and unshackling businesses from what some see as outdated zoning rules.

Lurie’s proposed law seeks to reform current preservation standards that present hurdles to potential tenants by preventing certain alterations or making them prohibitively expensive.

“Adding greater flexibility for these special buildings will ensure they won’t fall into disrepair due to disinvestment,” the Mayor’s Office said of the proposal.

Parking-to-housing advances in one Bay Area city

Out of a handful of Bay Area municipalities that have floated building housing on parking lots, Menlo Park has beat out Palo Alto and Los Altos with an actual plan.

The Peninsula city is seeking proposals from developers for multifamily housing combined with public parking and possibly retail or commercial components. Officials hope to turn three city-owned parking lots on Oak Grove Avenue between University Drive and El Camino Real into affordable housing properties.

Alliant Communities, MidPen Housing, Presidio Bay Ventures and a joint venture between Related Companies and Alta Housing have already each been approved to submit one proposal. Interested developers must submit development proposals that would help the city create at least 345 residential units for low-income and extremely-low-income households.

Local business owners aren’t too hot on the idea, though. The Save Downtown Menlo group has been opposed to the idea, criticizing the apparent rush to meet the city’s housing goals with a quick fix in one spot.

Developers have until Dec. 15 to submit proposals to the city.