Q1 2024 San Francisco Office Occupier's Guide

The San Francisco office market started 2024 stronger than any quarter since 2020 with positive net absorption, primarily fueled by OpenAI’s sublease occupancy of 486K SF in Mission Bay, and more tenants looking to secure new office space. However, challenges persist. Vacancy increased to 32.7%, and availability stayed flat at 37%, underscoring the vast amount of space still on the market. The surplus of available space continues to exert downward pressure on asking rents, which have fallen $3.64 for CBD space and $2.79 for the overall market year over year. Sublease availability decreased 916K SF or 1.0% since its peak in Q3 2023, largely driven by lease expirations and notable transactions such as OpenAI (486K SF), Anthropic (230K SF), Adyen (150K SF), and SVB (60K SF). 

Tenants and landlords remain under pressure due to high interest rates, reduced VC investment, corporate cost-cutting, and ongoing return to office struggles. The technology sector is most impacted as evidenced by Bay Area layoffs totaling 76,000 in 2023 and an additional 3,900 jobs in Q1 2024. With the technology sector in capital preservation mode, the market recovery will be slow.