AI drives office rebound in San Francisco

Artificial intelligence leases jump 46% to 3.6M sf, expected to rise in future

AI Drives Office Rebound in San Francisco
JLL's Alexander Quinn (JLL, Getty)

Robots may revive San Francisco.

Generative artificial intelligence has boomed across the city, with the volume of offices leased by AI firms rising 46 percent last year to 3.6 million square feet, Quartz reported, citing figures from brokerage JLL.

Alexander Quinn, the San Francisco-based senior director of research for JLL, predicts that number will reach 12.5 million square feet by 2030.

The rush for offices by such companies as Hive, Tome and Chef Robotics — in addition to mega expansion by OpenAI and Anthropichave helped to counter offices hollowed out during a shift by tech and other sectors to remote work. 

The city’s office vacancy in December hit a record 35.9 percent.  AI firms made up 28 percent of new leases last year in San Francisco, according to JLL.

“It’s a counter-current to a lot of the old established tech firms that have been shrinking over the last three years,” Quinn told Quartz of AI’s growing footprint.

JLL predicts AI firms’ share of new leases will inch down slightly this year, but remain three to four times higher than before the pandemic.

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AI firms have stampeded toward San Francisco because of talent. Quinn said about 20 percent of national AI talent is based in the Bay Area, birthplace of artificial intelligence at such universities as Stanford and UC Berkeley.

AI chatbot startup Andi moved from Miami to Downtown San Francisco. Toronto-based AI platform Cohere opened its second headquarters in the city. AI software provider Netradyne has expanded its operations in San Francisco.

“The Bay Area continues to draw a substantial portion of the nation’s venture capital funding, solidifying its status as a pivotal location,” Netradyne Chief Financial Officer Tom Schmitt said last fall. 

The growing number of AI leases are expected to draw other businesses to the area, too. Startup accelerator Y Combinator recently moved its headquarters to Mountain View to take advantage of the region’s growing AI industry.

Economic activity in Downtown San Francisco contributes to 75 percent of the city’s GDP, according to Quinn. “The more we see a resurgence of the commercial office market in the downtown, the broader impacts it has on the greater economy of the Bay Area,” he told Quartz.

— Dana Bartholomew