2022 halftime report for Bay Area commercial: Shrinking footprints mean 2.5M sf vacant

Of the 14 firms and companies that shrunk or disclosed plans this year to shrink their office footprints in the Bay Area by at least 50,000 square feet, 10 are looking to do so in San Francisco. SF-based companies or those with offices in the city have vacated or plan to exit almost 1.8 million square feet of space, according to The Real Deal’s research. That represents almost three-quarters of about 2.5 million square feet of property across the Bay Area that businesses have given up or announced plans this year to relinquish.

It’s halftime for the Bay Area’s commercial real estate market in 2022, a good time to take stock of the businesses that shrunk their footprints or announced plans to do so this year. Within this group, their rationale for downsizing varies. Nektar Therapeutics, for example, plans to shed almost 200,000 square feet of office and life science space along with 500 jobs in San Francisco’s Mission Bay neighborhood. The company is making the cuts after clinical trial failures and the end of its cancer-fighting program with Bristol-Myers Squibb.

Others such as Sephora and the State Bar of California are shrinking their footprints to support hybrid in-person and remote work models. Sephora made headlines at the start of the year when it subleased 286,000 square feet of offices across 16 floors from Salesforce, San Francisco’s second-largest new office lease of the pandemic. (The largest was Google Cloud’s 300,000-square-foot sublease from Stripe at 510 Townsend Street, also in San Francisco). The beauty company will move its U.S. headquarters into space at 350 Mission Street next year, consolidating offices at 425 and 525 Market Street. The relocation will result in a 23,000-square-foot decrease in its footprint.

The largest planned downsizing by a Bay Area company involves Block’s former headquarters at 1455 Market Street in San Francisco. The financial tech company formerly known as Square doesn’t plan to renew its lease on the 470,000-square-foot space once it expires in September 2023. The decision, which became public in June, represents the latest blow to the city’s Mid-Market neighborhood, where one in three offices were vacant at the end of the first quarter. It also pushes out the recovery timetable for the city’s office market, which continues to grapple with a glut of empty space.

The Real Deal’s data collection effort relied primarily on recent reporting, but some deals might be missing from the above map graphic. There will be two more reports with interactive maps to follow. Please contact Matt Niksa at matthew.niksa@therealdeal.com if you have any suggested additions or edits.

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Block to pull out of SF’s Mid-Market after delisting HQ