SF Office Vacancy Rates Drop as AI Fuels Market Turnaround

Anica Petkovic • News • June 25, 2025 • Time reading: 2 min

Momentum is building in San Francisco’s office sector—and this time, the numbers back it up.

According to new data from CBRE, San Francisco’s office vacancy rate dropped to 35.1% in Q2 2025, down from 35.8% in the previous quarter. This marks the third straight quarter of improvement—and the largest quarterly decline in vacancy since early 2015.

The driving force? Artificial intelligence.

AI Tenants Are Rewriting the Market

Since late 2024, AI-related companies have leased over 1 million square feet of office space in San Francisco—nearly 90% of all new leasing activity in that period, per CBRE’s Tech Insights Center.

While much of the traditional tech sector has been in retreat since 2020, AI firms are actively expanding. These companies, many of which are still in their early stages, are committing to long-term footprints—breathing new life into the city’s core office assets.

CBRE’s Colin Yasukochi calls it a “significant directional change” for the city’s office landscape. The numbers support that narrative:

Vacancy has declined for three straight quarters
Availability dropped to 37.7%, down from 38.5%
Office absorption stands at +1.1M SF since Q4 2024

Major Deals and the Road Ahead

Several headline leases underscore the shift:

The City of San Francisco signed on for 226,000 SF at 1455 Market St.
Coinbase leased 150,000 SF at Mission Rock’s Building B
Morrison Foerster committed to 112,000 SF at 101 California St.

And while OpenAI and Anthropic made waves in late 2023 with hundreds of thousands of square feet each, CBRE is now tracking 1.4 million SF in active space requirements from 39 AI firms—with many more still ramping up.

Today, AI tenants occupy around 5 million square feet of office space in San Francisco. According to Yasukochi, that number could grow to 20 million square feet over the next five years—potentially cutting the city’s vacancy rate in half.

A Real Recovery—Not Just a Blip

It’s too early to call this a full comeback. But three quarters of declining vacancy, paired with steady leasing momentum from a high-growth sector, signals a shift we haven’t seen in years.

At IPG, we’ve long believed in the adaptability of San Francisco’s commercial real estate landscape—and this new wave of demand is a compelling reminder: innovation doesn’t just drive technology—it drives space, too.

Source: CBRE, via San Francisco Business Times reporting.