There’s one shiny spot for San Francisco’s workplace area market

SAN FRANCISCO — Lately, San Francisco’s picture as a welcoming place for companies has taken successful.

Main tech corporations resembling Dropbox and Salesforce diminished footprints within the metropolis by subleasing workplace area, whereas retailers together with Nordstrom and Anthropologie pulled out of downtown. Social media agency X, previously Twitter, vacated its Mid-Market headquarters for Texas, after proprietor Elon Musk complained about “dodging gangs of violent drug addicts simply to get out and in of the constructing.”

Whereas the town stays on the defensive, one shiny spot has been a increase in synthetic intelligence startups.

San Francisco’s 35.4% emptiness fee within the first quarter — among the many highest within the nation — is predicted to drop one to 3 share factors within the third quarter due to AI corporations increasing or opening new places of work within the metropolis, in accordance with actual property brokerage agency JLL. The final time San Francisco’s emptiness fee dropped was within the fourth quarter, when it declined 0.2% — the primary time for the reason that COVID-19 pandemic, in accordance with JLL.

“Folks wished to depend us out, and I feel that was a foul guess,” stated Mayor Daniel Lurie. “We’re seeing all of this as a result of the ecosystem is best right here in San Francisco than anyplace else on the planet, and it’s actually an thrilling time.”

5 years in the past, AI leases in San Francisco’s business actual property market have been comparatively sparse, with simply two leases in 2020, in accordance with JLL. However that’s since soared to 167 leases within the first quarter of 2025. The workplace footprint for AI corporations has additionally surged, making up 4.8 million sq. ft in 2024, up from 2.6 million in 2022, JLL stated.

“You want the expertise base, you want the entrepreneur ecosystem, and also you want the VC ecosystem,” stated Alexander Quinn, senior director of financial analysis for JLL’s Northwest area. “So all these three issues exist throughout the higher Bay Space, and that permits us to be the clear chief.”

AI companies are drawn to San Francisco due to the focus of expertise within the metropolis, analysts stated. The town is residence to AI corporations together with ChatGPT maker OpenAI and Anthropic, recognized for the chatbot Claude, which in flip entice companies that need to collaborate. The Bay Space can also be residence to universities that entice entrepreneurs and researchers, together with UC Berkeley, UC San Francisco and Stanford College.

Enterprise capital corporations are pouring cash into AI, fueling workplace and workers development. OpenAI landed final quarter the world’s largest enterprise capital deal, elevating $40 billion, in accordance with analysis agency CB Insights.

OpenAI leases about 1 million sq. ft of area throughout 5 completely different places within the metropolis and employs roughly 2,000 individuals in San Francisco. The corporate earlier this 12 months opened its new headquarters in Mission Bay, leasing the area from Uber.

OpenAI started as a nonprofit analysis lab in 2015 and the individuals concerned discovered their technique to San Francisco for a similar motive why earlier generations of technologists and folks pushing the frontier in america are drawn to the town, stated Chris Lehane, OpenAI’s vp of worldwide affairs in an interview.

“It’s a place the place, while you put out an concept, regardless of how loopy it could appear on the time, or how unorthodox it could appear … San Francisco is the town the place individuals don’t say, ‘That’s loopy,’” Lehane stated. “They are saying, ‘That’s a very fascinating concept. Let’s see if we will do it.’”

The inside of OpenAI’s new San Francisco headquarters within the Mission Bay neighborhood. (OpenAI)

Databricks, valued at $62 billion, can also be increasing in San Francisco. Databricks in March introduced it would transfer to a bigger area within the Monetary District subsequent 12 months, boosting its workplace footprint to 150,000 sq. ft and greater than doubling its San Francisco workers within the subsequent two years. It pledged to carry its annual Information + AI Summit within the metropolis for 5 extra years.

The corporate holds 57,934 sq. ft at its present San Francisco workplace close to the Embarcadero, in accordance with CoStar, which tracks actual property tendencies.

“San Francisco is an actual expertise magnet for AI expertise,” stated Databricks’ co-founder and vp of engineering Patrick Wendell. “It’s an attractive metropolis for individuals to reside and work in and so we actually are simply following the place the workers are.”

A number of years in the past, Wendell stated his firm was contemplating whether or not to develop in San Francisco. On the time, it was unclear whether or not individuals would return to places of work after the pandemic, and a few companies raised considerations about security and cleanliness of San Francisco’s streets. Wendell stated his firm determined to speculate extra within the metropolis after getting reassurances from metropolis leaders.

“Individuals are seeing an administration that’s targeted on public security, clear streets and creating the situations that additionally says that we’re open for enterprise,” stated Lurie, who defeated incumbent mayor London Breed final November by campaigning on public security. “We’ve stated from day one, we’ve to create the situations for our arts and tradition, for our small companies and for our innovators and our entrepreneurs to thrive right here.”

Laurel Arvanitidis, director of enterprise improvement for San Francisco’s Workplace of Financial and Workforce Growth, stated that the town’s coverage and tax reforms have helped entice and retain companies in recent times, together with an workplace tax credit score that provides as much as a $1-million credit score for companies which can be new or relocating to San Francisco.

On Thursday, Lurie introduced on social media that cryptocurrency alternate Coinbase is opening an workplace in San Francisco after leaving the town 4 years in the past.

“We’re excited to reopen an workplace in SF,” Coinbase Chief Government Brian Armstrong wrote in response to the mayor’s social media publish. “Nonetheless plenty of work to do to enhance the town (it was so badly run for a few years) however your glorious work has not gone unnoticed, and we drastically respect it.”

Santa Clara-based Nvidia can also be in search of San Francisco workplace area, in accordance with an individual aware of the matter who declined to be named. The information was first reported by the San Francisco Chronicle. Nvidia, which additionally has California places of work in San Dimas and Sunnyvale, declined to remark.

“It’s due to AI that San Francisco is again,” Nvidia Chief Government Jensen Huang stated final month on the Hill & Valley Discussion board podcast. “Nearly everyone evacuated San Francisco. Now it’s thriving once more.”

However San Francisco nonetheless has challenges forward, as corporations proceed to push employees to return to the workplace. Whereas the road surroundings has improved, it will likely be essential for the town to maintain up the progress.

Lurie stated his administration inherited the most important finances deficit within the metropolis’s historical past they usually should get that below management. His administration’s activity is to ensure streets and public areas are clear, protected and welcoming, he stated.

“We’ve got work to do, there’s no query, however we’re a metropolis on the rise, that’s for positive,” Lurie stated.

Occasions workers author Roger Vincent contributed to this report.