The improvement was ever so slight, but a key indicator of the health of the office leasing market in San Francisco showed another glimmer of hope that the bottom has been reached and leases continue to tick up.
As the San Francisco Business Times reports, the net absorption for office space in SF — which is the total space currently occupied by tenants minus space vacated during a specific period — flipped from negative to positive in the fourth quarter of 2024, with a positive 320,000 square feet absorbed. And the vacancy rate, which ticked steadily upward or stagnated for four years, ticked slightly downward this year.
Office vacancy for Q4 was 34.3% according to preliminary data, down from 34.5% in the third quarter.
Commercial real estate experts surmised earlier this year that the rate of increase for the vacancy rate was slowing, even as vacancy hit a peak of 37% in the second quarter of 2024, the highest of any major US city.
Firms continued dumping large swaths of space, including X/Twitter, which abandoned 400,000 square feet on mid-Market in June. But, as the Chronicle noted in September, signs of a turnaround have been appearing, like two huge new lease deals being signed in one month totaling 615,000 — OpenAI's takeover the former Old Navy headquarters (315,000 square feet), and UCSF's deal to take 300,000 square feet of the still under-construction Potrero Power Station redevelopment project.
Experts have been saying since early in the pandemic that this turnaround would take a significant amount of time for San Francisco, especially given how broadly companies here had embraced the pivot to more remote work. That has been borne out in deals like the 100,000-square-foot lease signed by accounting firm KPMG in September — a move from Second Street to 505 Howard that represented a downsizing of 40,000 square feet.
"Current tenant demand and future net absorption potential remain high," said Colin Yasukochi, executive director of CBRE’s Tech Insights Center, speaking to the Chronicle this fall. "Demand has been consistently replenished, considering seven leases exceeding 100,000 square feet and totaling about 1 million square feet occurred thus far in 2024."
Total demand as of this fall, according to CBRE, reached about 6.7 million square feet of space, meaning that office tenants were on the hung for that much space across the city.
The year isn't yet fully done, but Yasukochi noted at the time that 2024 was on pace to show the highest level of leasing activity in SF since 2019.
Previously: There Are Currently 15 Salesforce Towers Worth of Empty Offices In San Francisco
Photo: Jamie Street
