Decagon the Latest AI Company to Expand in San Francisco

Another artificial intelligence company is growing in San Francisco.

AI-powered customer service startup Decagon is in talks to lease two floors of offices spanning approximately 70,000 square feet at 680 Folsom Street, the San Francisco Business Times reported. The firm’s search has been ongoing for months and no deal has closed with landlord BXP, according to the Business Times.

The news comes after an announcement Wednesday that the three-year-old company raised $250 million in a Series D funding round that placed the firm’s value at $4.5 billion. Decagon’s valuation has tripled in the past six months, with a $131 million Series C round last June valuing the company at $1.5 billion. The company said the following month that it planned to use the Series C capital for product development and to increase its employee headcount.

Decagon is currently based at 100 First Street, across the street from Salesforce Tower in the city’s Financial District. The size of its offices there are not clear.

BXP is in negotiations with tenants to lease out 132,000 square feet of offices at 680 Folsom and the adjacent 50 Hawthorne Street. As of Wednesday, BXP has completed two deals for approximately 69,000 square feet at the two buildings, according to the Business Times. The two structures together total 522,406 square feet and were 65.8 percent occupied as of the fourth quarter, up from 59.2 percent the previous quarter, according to the Business Times.

AI firms have been credited with driving down vacancy and increasing demand for office space in the San Francisco market. The amount of office space that was vacant or available for lease decreased by nearly 2 million square feet in the fourth quarter compared to the prior quarter, marking the steepest drop in office availability in four consecutive quarters of decline, according to CoStar Group. Companies in San Francisco leased 1 million more square feet than they vacated in the fourth quarter, making for the largest such instance of positive absorption since 2018, per CBRE data cited by the Business Times.

AI startup Sierra inked the largest lease deal of last year in San Francisco, taking up 300,000 square feet at 185 Berry Street in China Basin. AI-focused companies account for about 2.8 million square feet of the approximately 8 million square feet of offices that firms are currently searching for in San Francisco, according to the Business Times. About 24 percent of office space in San Francisco is empty or available for lease, per CoStar.

— Chris Malone Méndez