Q1 2026 San Francisco Office Occupier's Guide

San Francisco office market is off to a hot start. Vacancy fell for the fourth consecutive quarter, declining to 29.0%, down 1.0% quarter-over-quarter (QoQ) and 4.2% year-over-year (YoY). Availability also declined, falling to 33.1%, a 1.1% decrease QoQ. Average asking rents continued to increase, rising to $69.19 PSF, up $2.12 PSF YoY, or 3.2%. Net absorption was positive for the quarter, totaling 948K SF the highest quarterly total since 2018.

AI tenant demand brought renewed life to the San Francisco office market, with several consecutive quarters of increased leasing activity. AI demand has pushed tenant requirements to nearly 7.4M SF, near all-time highs, supporting continued market momentum.

Capital markets had a positive start with international and institutional buyers deploying significant capital on notable assets including 600 Montgomery (Transamerica Pyramid), 123 Mission, 415 Natoma (5M), and 45 Fremont. However, three of the four transactions were driven by distress, with deed-in-lieu of foreclosure, while the Transamerica Pyramid sale, though not distressed, still reflected a repricing of a trophy asset. Nonetheless, these deals reflect meaningful capital deployment in the San Francisco office market.