About 67 percent of San Francisco office properties have sold for less than their previous sale prices in the past two years, according to data from Yardi Research cited by the San Francisco Business Times. This places San Francisco just behind Houston in terms of the percentage of discounted sales among major U.S. cities. The national average for such transactions is 42 percent.
San Francisco continues to report the highest office vacancy rate in the United States, with nearly 35 percent of offices currently unoccupied. While there has been a slight improvement as more tenants seek space, this remains the highest rate nationally.
Over the last two years, more than $3 billion worth of office property has changed hands in the Bay Area, making it one of only three markets nationwide—alongside Manhattan and Washington, D.C.—to reach that level of transaction volume. Across the country since 2023, over 3,200 office properties with at least two prior sales have been sold. In response to uncertain future demand for office space, some buyers in the Bay Area are considering adaptive reuse and redevelopment options.
Average sales prices for office properties in San Francisco have dropped to about $200 per square foot—less than a quarter of pre-pandemic peaks.
Recent reports from CBRE and Colliers suggest that growth in artificial intelligence companies could help reduce vacancy rates significantly by 2030. Over the past five years, AI-driven leasing activity has increased sevenfold according to Colliers data cited by the Business Times. CBRE projects that AI firms could expand their footprint from around 5 million square feet today to as much as 21 million square feet by 2030, potentially halving current vacancy rates.
Several AI firms have recently signed leases across San Francisco and neighboring areas. Last month, Databricks leased 305,000 square feet in Sunnyvale to supplement its new headquarters in San Francisco. Skild AI established an office in San Mateo; Glean expanded its presence with an additional 45,000 square feet in San Francisco; and Resolve AI committed to a 37,000-square-foot lease in Potrero Hill earlier this month.
