SF Office Demand Soars, But Foot Traffic Lags

News this week that OpenAI eclipsed one million square feet in San Francisco office leases, paired with the tech company Databricks’ deal to take over 90,000 square feet in downtown, buttressed the ongoing story of San Francisco’s momentous office return.

Demand for office space in the city reached 8 million square feet at the end of 2025, according to CBRE — an all-time high. The city’s vacancy rate is dipping — though it still sits around 30.8 percent — and artificial intelligence companies are pouring into the market.

Despite all of this momentum for office space, a new report this week shows the bulk of San Francisco’s central business district is still searching for its workweek footing.

Downtown foot traffic during work hours between Monday and Friday remains barely half of what it was in 2019, according to data published by the Downtown San Francisco Partnership, an advocacy organization focused on the neighborhood’s recovery. The numbers were pulled from Placer.ai, which uses a subset of mobile phone data to track visitation.

In October, San Francisco Standard writer Jillian D’Onfro published a story highlighting the gap between the momentum depicted in headlines as well as analyst reports, and the actual feeling from the city’s sidewalks. The data published this week helps explain what has been a nagging inconsistency for locals. The well-known flight-to-quality phenomenon has also played a big role, as Class A and trophy spaces are winning the true beneficiaries of the return-to-office race, leaving the city’s robust stock of older, lower quality buildings to shoulder the vacancy burden.

Still, San Francisco is expected to see nearly 13 million square feet of office leasing activity in 2026, according to a report earlier this year from VTS. That’s a 15 percent increase year-over-year, which VTS said leads all U.S. metros.

The Downtown San Francisco Partnership’s report also shows that weekend visits have far outpaced the workweek, and foot traffic between 6 p.m. and 6 a.m. last year eclipsed 2019’s numbers — early signs, the organization says, that downtown is becoming more than just a central business district.

Major apartment project passes planning commission

For the better of two decades, developers have pursued a major housing development at the corner of Market Street and Van Ness Avenue.

San Francisco officials have joined in this effort. The city approved proposals for a 304-unit residential tower in 2015, and approved it again when the proposal grew to 460 homes in 2022. Despite the support, no dirt has yet moved.

Now, a new developer hopes the third time will be the charm. On Thursday, the city planning commission approved yet another expansion of the unbuilt project, to 541 homes. The 400-foot tower will include only market-rate housing, and local developer Emerald Fund will contribute more than $20 million to the city’s affordable housing fund as a compromise for not including subsidized units in the project.

The latest iteration also eliminated ground-floor retail from the proposal, making for an entirely residential project. A source close to the project who wasn’t authorized to speak publicly told The Real Deal that project feasibility motivated the developer to squeeze an additional 80 homes into the project.
Developers have increasingly worked to squeeze as many housing units into their projects as a means of feasibility — even after the project has already earned government permits. Thompson Builders recently moved to increase the housing in its already-approved tower at 360 Fifth Street from 127-units to 272 units. DM Development’s Potrero Hill’s residential tower recently increased the density of its development from 290 to 425 homes.