Office Vacancy Hits Record High in SF, San Jose and Oakland

Downtown office vacancies in San Francisco, San Jose and Oakland have reached record highs, while the frozen market may be showing signs of a thaw.

Office vacancy in Downtown San Francisco hit 33.9 percent in the third quarter, followed by 31.5 percent in San Jose and 29.7 percent in Oakland, the San Jose Mercury News reported, citing figures from CBRE.

San Francisco saw its empty offices in Downtown climb 2.3 percent from the second quarter, while San Jose’s rose 0.2 percent and Oakland’s increased 1.2 percent.

Add the amount of offices available for sublease from July through September, and the marketplace looks even worse.

The office availability rate in Downtown San Francisco was 37.5 percent, up from 34.2 percent in the second quarter, when adding the available vacant and sublease offices on the market.

Downtown Oakland had a 33.4 percent third-quarter availability rate, up from 32.3 percent.

Downtown San Jose had a 32.7 percent availability rate up from 27.8 percent, marking the largest gain of 4.9 percent.

Pre-pandemic leases still account for about two-thirds of San Francisco’s office square footage, according to data provided to The Real Deal from brokerage Avison Young, indicating that there remains plenty of turnover ahead.

Nonetheless, real estate experts see signs of a turnaround, with some employers wanting to reverse the movement toward remote work. Others see new office leases by artificial intelligence firms in San Francisco.

“There’s no denying the higher-than-average vacancy in Silicon Valley, but the stats are a snapshot of time, not a crystal ball for the future,” Steffen Kammerer, a CBRE senior managing director, told the Mercury News. “With more tour requests for top-shelf inventory in the past month and increased commuter traffic, we are optimistic that the market is turning.”

The central cores of the Bay Area’s three largest cities could face long-term changes, experts suggest.

“This is an existential shift for the downtowns and their functions,” Mark Ritchie, president of San Jose-based Ritchie Commercial, told the newspaper. “But because of the tech industry, we might surprise ourselves again.

“The upswing will come sooner than people think, and it will be bigger than people expect.”

— Dana Bartholomew