Article
July 24, 2024
TEAMWRKX Construction

A look at Colliers’ latest San Francisco Office Market Report

San Francisco's Q2 2024 office market saw a 30% vacancy rate. Leasing, led by tech and AI firms, rose while rents dropped 12%. Despite high interest rates, investors seek long-term opportunities.

Co-Author(s): Leyla Senvar and Meghan Hall, Teamwrkx Marketing

The San Francisco office market experienced significant shifts in Q2 2024, marked by a record-high vacancy rate of 30%. This comes after a slow in vacancy increases but still following 608,984 square feet of negative net absorption. Leasing activity showed signs of recovery, with 1.8 million square feet transacted, primarily through smaller leases under 5,000 square feet. This indicates a growing trend towards a small-tenant market.

Key points include:

  • Vacancy and Availability: Availability hit a peak of 35.2%, though the rate of increase slowed, suggesting a potential plateau in office supply.
  • Leasing and Demand: Leasing activities were notably driven by the tech sector, particularly AI companies. The number of tenant tours also surged, reflecting heightened interest.
  • Rents: Overall effective rents decreased by 12% quarter-over-quarter. Class A spaces commanded higher rents, averaging $73.51 per square foot, while Class B and C spaces leased for $55.63 and $36.63, respectively.
  • Capital Markets: Investors remained cautious due to high interest rates, though there is interest in discounted opportunities for long-term investments.

These trends indicate both challenges and opportunities in the San Francisco office market. The increasing demand from AI and tech companies, along with the shift to smaller office spaces, will surely shape the landscape for construction and renovation projects to come.

Download the whole report here.