SF's AI boom can't stop real estate slide, as office vacancies reach new record
San Francisco's real estate market is struggling with a 34.5% office vacancy rate and rent prices at a low since 2015. AI companies lease space, but hybrid work and tech layoffs contribute to vacancies. The market shows signs of improvement amid uncertainties.
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San Francisco's real estate market is facing challenges as office vacancies hit a record high of 34.5% in the second quarter, with rent prices dropping to their lowest since 2015. Despite the city benefiting from the artificial intelligence boom, the trend towards hybrid work and mass layoffs in the tech industry have contributed to the increase in vacancies. While AI startups like OpenAI, Anthropic, and Scale AI have leased significant office spaces, the broader market struggles with bringing employees back post-Covid and tech companies downsizing. The city's top employers are gradually returning employees to offices, particularly in the financial district, but areas like SoMa are experiencing nearly 50% vacancy rates. Although there are positive signs of market improvement, uncertainties such as the upcoming presidential election may further impact leasing decisions. The real estate market in San Francisco continues to face challenges despite the presence of AI companies and some positive indicators.
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10 commentsThis is a correction that makes sense: occupancy is shifting to benefit the small businesses that provide amenities like restaurants and shops.
SF's attempt to make office park-like experiences in transit deserts made a lot of money for real estate developers but these properties need to be massively written down.
That said, I would likely need 30-40k from a company to give up the personal convenience of a <60 second commute, the ability to get fresh air when I want it, etc. And when I am in coding mode, the absolute quiet is a must.
1. Unreliable and expensive public transportation 2. Expensive tolls and parking 3. High number of car break ins 4. Just a general ugliness to the city: trash, feces, homeless encampments, open drug use, graffiti and boarded up storefronts, crime, and mental illness on full display
Make it easier for people to come in and make them want to come in. With a budget of billions of dollars for such a small city, you'd think these issues would be addressed quickly.
They’re burning billions mostly in datacenter runs. AI researchers could be doing 1M+ total comp per year but there aren’t that many to fill vacant office space.
It's still way too high. Try $10 per sq ft.
[1] https://tildes.net/~design/1g5r/nathan_berman_has_helped_res...
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