Theres one bright spot for San Franciscos office | Real Estate news

SAN FRANCISCO — In current years, San Francisco’s image as a welcoming place for companies has taken a hit.

Major tech corporations such as Dropbox and Salesforce diminished footprints in town by subleasing office space, while retailers including Nordstrom and Anthropologie pulled out of downtown. Social media firm X, previously Twitter, vacated its Mid-Market headquarters for Texas, after proprietor Elon Musk complained about “dodging gangs of violent drug addicts just to get in and out of the building.”

While town stays on the defensive, one bright spot has been a growth in artificial intelligence startups.

San Francisco’s 35.4% emptiness fee in the first quarter — among the best in the nation — is predicted to drop one to three share factors in the third quarter thanks to AI corporations increasing or opening new workplaces in town, according to real estate brokerage firm JLL. The final time San Francisco’s emptiness fee dropped was in the fourth quarter, when it declined 0.2% — the first time since the COVID-19 pandemic, according to JLL.

“People wanted to count us out, and I think that was a bad bet,” stated Mayor Daniel Lurie. “We’re seeing all of this because the ecosystem is better here in San Francisco than anywhere else in the world, and it’s really an exciting time.”

Five years in the past, AI leases in San Francisco’s business real estate market have been comparatively sparse, with just two leases in 2020, according to JLL. But that’s since soared to 167 leases in the first quarter of 2025. The office footprint for AI corporations has also surged, making up 4.8 million sq. toes in 2024, up from 2.6 million in 2022, JLL stated.

“You need the talent base, you need the entrepreneur ecosystem, and you need the VC ecosystem,” stated Alexander Quinn, senior director of financial analysis for JLL’s Northwest area. “So all those three things exist within the greater Bay Area, and that enables us to be the clear leader.”

AI corporations are attracted to San Francisco because of the focus of expertise in town, analysts stated. The metropolis is home to AI corporations including ChatGPT maker OpenAI and Anthropic, identified for the chatbot Claude, which in flip entice companies that need to collaborate. The Bay Area is also home to universities that entice entrepreneurs and researchers, including UC Berkeley, UC San Francisco and Stanford University.

Venture capital corporations are pouring money into AI, fueling office and workers growth. OpenAI landed final quarter the world’s largest enterprise capital deal, raising $40 billion, according to analysis firm CB Insights.

OpenAI leases about 1 million sq. toes of space across 5 completely different areas in town and employs roughly 2,000 people in San Francisco. The company earlier this 12 months opened its new headquarters in Mission Bay, leasing the space from Uber.

OpenAI started as a nonprofit analysis lab in 2015 and the people concerned discovered their means to San Francisco for the identical cause why earlier generations of technologists and people pushing the frontier in the United States are drawn to town, stated Chris Lehane, OpenAI’s vice president of world affairs in an interview.

“It is a place where, when you put out an idea, no matter how crazy it may seem at the time, or how unorthodox it may seem … San Francisco is the city where people don’t say, ‘That’s crazy,’” Lehane stated. “They say, ‘That’s a really interesting idea. Let’s see if we can do it.’”

The inside of OpenAI’s new San Francisco headquarters in the Mission Bay neighborhood. (OpenAI)

Databricks, valued at $62 billion, is also increasing in San Francisco. Databricks in March introduced it’s going to transfer to a bigger space in the Financial District next 12 months, boosting its office footprint to 150,000 sq. toes and more than doubling its San Francisco workers in the next two years. It pledged to maintain its annual Data + AI Summit in town for 5 more years.

The company holds 57,934 sq. toes at its present San Francisco office in the Embarcadero, according to CoStar, which tracks real estate trends.

“San Francisco is a real talent magnet for AI talent,” stated Databricks’ co-founder and vice president of engineering Patrick Wendell. “It’s a beautiful city for people to live and work in and so we really are just following where the employees are.”

Several years in the past, Wendell stated his company was contemplating whether or not to broaden in San Francisco. At the time, it was unclear whether or not people would return to workplaces after the pandemic, and some companies raised considerations about security and cleanliness of San Francisco’s streets. Wendell stated his company determined to invest more in town after getting reassurances from metropolis leaders.

“People are seeing an administration that is focused on public safety, clean streets and creating the conditions that also says that we’re open for business,” stated Lurie, who defeated incumbent mayor London Breed final November by campaigning on public security. “We’ve said from day one, we have to create the conditions for our arts and culture, for our small businesses and for our innovators and our entrepreneurs to thrive here.”

Laurel Arvanitidis, director of business development for San Francisco’s Office of Economic and Workforce Development, stated that town’s coverage and tax reforms have helped entice and retain companies in current years, including an office tax credit that offers up to a $1-million credit for companies that are new or relocating to San Francisco.

On Thursday, Lurie introduced on social media that cryptocurrency exchange Coinbase is opening an office in San Francisco after leaving town 4 years in the past.

“We are excited to reopen an office in SF,” Coinbase Chief Executive Brian Armstrong wrote in response to the mayor’s social media post. “Still lots of work to do to improve the city (it was so badly run for many years) but your excellent work has not gone unnoticed, and we greatly appreciate it.”

Santa Clara-based Nvidia is also trying for San Francisco office space, according to a individual acquainted with the matter who declined to be named. The news was first reported by the San Francisco Chronicle. Nvidia, which also has California workplaces in San Dimas and Sunnyvale, declined to remark.

“It’s because of AI that San Francisco is back,” Nvidia Chief Executive Jensen Huang stated final month on the Hill & Valley Forum podcast. “Just about everybody evacuated San Francisco. Now it’s thriving again.”

But San Francisco still has challenges forward, as corporations proceed to push employees to return to the office. While the road atmosphere has improved, will probably be vital for town to keep up the progress.

Lurie stated his administration inherited the biggest price range deficit in town’s historical past and they’ve to get that under control. His administration’s process is to make sure streets and public areas are clean, secure and inviting, he stated.

“We have work to do, there’s no question, but we are a city on the rise, that’s for sure,” Lurie stated.

Times workers author Roger Vincent contributed to this report.