The San Francisco office market has shown significant activity, with recent data pointing to a surge in leasing. According to real estate analytics firm Co-Star, the combined office markets of San Francisco and San Mateo counties saw 2 million square feet of net absorption between October and December 2025.
CBRE reported that this momentum lowered the city’s office vacancy rate from 34.4 percent to 32.8 percent. Nearly 90 percent of fourth-quarter absorption was attributed to Class A leases. However, CBRE cautioned that strong demand for high-quality offices is unlikely to boost interest in Class B buildings. Instead, as premium space fills up, new construction of higher-end offices may follow.
While artificial intelligence companies have contributed to increased demand, CBRE noted that firms outside the AI sector account for more than half of the current search for about 8 million square feet of office space.
In early 2026, activity remains brisk. Shvo, owner of the Transamerica Pyramid, announced three new leases totaling 25,000 square feet in its Class A building. CEO Michael Shvo stated one lease reached over $300 per square foot for a 4,000-square-foot space—totaling $1.2 million annually—and claimed it set a record for San Francisco and the West Coast, as well as being the second highest price-per-square-foot lease nationally. The Real Deal could not independently verify this claim.
These deals followed nine leases signed by Shvo in December covering 220,000 square feet; occupancy at the Transamerica Pyramid now stands at 85 percent according to a company spokesperson.
Elsewhere in downtown San Francisco, two historic Beaux-Arts buildings are facing different challenges and opportunities. After Kylli defaulted on a $350 million loan backed by its property at 225 Bush Street in November 2024, K-Star Asset Management LLC—the loan’s special servicer—is reportedly considering putting the debt up for sale through JLL. If sold, the buyer could either foreclose or negotiate with Kylli for control of the building. Designed by George W. Kelham for John D. Rockefeller in the 1920s, occupancy at this tower has dropped from full capacity in 2020 to over 60 percent vacant as of September 2025.
Nearby at 685 Market Street, Brookfield Office Properties has listed the Monadnock Building—a renovated ten-story Beaux-Arts structure dating back to 1907—for sale through JLL but has not disclosed an asking price. The building is about three-quarters leased; anchor tenant Notion Labs Inc occupies roughly half with ten years remaining on its lease.
Despite increased leasing activity overall, few trophy properties have changed hands recently and older buildings have seen steep declines in value due to tight capital conditions for office purchases in San Francisco.
