AI boom fuels San Francisco’s latest office leasing achievement

In San Francisco this year, companies signed leases for more than 10 million square feet of office space, a sharp redirection for a city that, not too long ago, lagged behind all others in the rate of workers returning to the office since the pandemic.

The 10.2 million square feet in office leases is the most in the city since 2019, according to CBRE. Yet, the city hit another milestone it hasn’t reached in more than a decade.

Year-over-year office vacancy fell by three points to 33.5 percent as of December, the most significant vacancy decline since 2011, when the country’s economy was crawling out of the Great Recession, according to the same CBRE report.

To no one’s surprise, the city’s commercial real estate market has risen atop the artificial intelligence tide. AI companies leased 2.5 million square feet in 2025, and now fill 7 million square feet of office space in the city, roughly 12 percent of San Francisco’s total occupied space.

Office leasing demand has also hit an all-time high, according to CBRE, with tenants in the market seeking about 8 million square feet of office space — AI companies accounted for 2.8 million square feet of this demand, or 35 percent.

The office demand could lead to new development in 2026. Colin Yasukochi, head of CBRE’s tech division, told San Francisco Business Times that as high-quality office supply becomes tighter, tenants in the market may look to partner on new development.

“Some of these companies may be in the market because they want to consolidate into a new development of some kind,” Yasukochi told the outlet. “Because right now, many of them are trying to assemble large nearby blocks of space, and for many of them, that isn’t quite as easy as it sounds.”

Office development has suffered a dry spell in San Francisco, during which no office towers or downtown developments have broken ground in more than five years.

However, Yasukochi told the Business Times he doesn’t expect AI companies to lead the push for new office development.

“It won’t be tech or AI, but a lot of the more traditional financial services companies that want to expand and refresh their space,” he said to the outlet. “They have been the ones that have traditionally gone to these types of developments.”

The city’s overall vacancy rate glosses over the waning availability of trophy office space, which sits at 15 percent, according to the San Francisco Chronicle. The newspaper reported that this could unlock “major office projects” planned for Central South of Market by 2027.

— Christopher Neely