AI Companies Driving Stellar San Francisco Office Leasing

Artificial intelligence is juicing the San Francisco office market as demand reaches record peaks.

In the third quarter, businesses sought 7.9 million square feet of offices in San Francisco, marking an all-time high for demand for office space in the city, the San Francisco Business Times reported, citing CBRE. Net new demand, meanwhile, reached 2.6 million square feet, aligning with pre-pandemic averages, signaling that the office market in the city is emerging from pandemic doldrums.

More office space in the city was leased than vacated for the fourth consecutive quarter. Sublease inventory is also on the decline.

About 60 percent of demand for offices is from tech companies, and nearly half of them are AI startups. Many of these businesses are seeking space before their current leases expire.

Still, vacancy across the city is more than 34 percent, though it’s lower at Class A-plus properties with 20 percent and 7 percent in the premium office market.

CBRE estimated in May that AI office occupancy would reach 5 million square feet and grow to 21 million square feet by 2030.

Up-and-coming AI companies like Postman and Glean have secured leases in San Francisco in recent months, while giants like OpenAI and Anthropic have similarly been expanding.

Just last month, Dario Amodei-led Anthropic signed a 100,000-square-foot lease for additional offices across the street from its nearly 230,000-square-foot headquarters.

One of the quarter’s largest deals was a 55,500-square-foot headquarters lease from AI-driven fintech startup Kikoff.

Office leasing from AI firms in San Francisco will only accelerate in the coming months, as demand from the sector has more than doubled over the past year, according to VTS. Office demand increased 107 percent last month compared to September of last year. That’s an increase of more than 350 percent since OpenAI launched ChatGPT in 2022.

— Chris Malone Méndez