From “Wait and See” to “Sign and Scale”: SF Leasing’s 2025 Turn

San Francisco’s office market didn’t sprint back in 2025—but it did turn. 

Leasing activity climbed to its highest annual total since 2019, net absorption swung positive, and vacancy finally ticked down. The momentum wasn’t uniform, but it was real—and it set the stage for a more decisive 2026.

What actually moved in 2025

Leasing volume surpassed 12 million SF over the last 12 months, with net absorption of roughly 2.2 million SF. Market vacancy eased to 22.3% and asking rents stabilized, rising 1.7% year-over-year to about $52/SF. Availability remains elevated (≈47.2 million SF), but the pace of move-outs slowed as the year progressed. 

Who’s driving demand

AI-led growth was the headline. 

Firms like Anthropic, Brex and Abridge AI inked sizable deals, joined by blue-chip professional services tenants (Morgan Lewis, Latham & Watkins, Dodge & Cox) and notable renewals (LinkedIn). Neuralink took a full building in South San Francisco. This mix—fast-growing AI plus institutional-grade services—was a key driver of 2025’s leasing rebound. 

Foot traffic told a similar story. Office visits in San Francisco posted the strongest year-over-year uptick among tracked cities in September, with the AI boom and a local return-to-office mandate boosting activity. 

Where deals are getting done—and on what terms

Speed and flexibility defined the year. 

Tenants prioritized move-in-ready space, shorter terms (often 3–5 years), and spec suites. Effective rents benefitted from rich concession packages—Class A buildings offered sizable TI allowances (up to ~$200/SF in select cases). Asking rents at the top end still approached ~$100/SF, while downtown subleases were marketed as low as the mid-$20s/SF, underscoring a barbell market with sharp pricing dispersion by quality and immediacy.

Sublease and supply picture

Sublease inventory remains high at ~8.0 million SF but is no longer swelling, and discounted sublets drew steady activity. On the supply side, developers stayed cautious: just ~2.5 million SF is under construction—near cycle lows—with roughly 85% pre-leased. New ground-up risk remains limited, which should help gradually tighten the market as demand accumulates.

Capital markets reset

Investment sales volume was subdued at about $1.8 billion over the past year, with pricing resets on display and private buyers leading the way. While trophy assets with strong tenancy still commanded premiums (e.g., Foundry Square II), several downtown trades highlighted discounted values and a market still sorting through repricing. YTD average pricing hovered near ~$360/SF, and cap rates continued to reflect wider risk premiums than the 2019 peak. 

What to watch in 2026

• Selective rent growth: Baseline forecasts point to modest rent gains and a slow grind down in vacancy as leasing momentum persists—especially in premium, transit-served assets. 
• AI as a real, not universal, catalyst: Expect continued demand from AI and adjacent users, but with a preference for furnished, move-in-ready space and operational flexibility. 
• Tight new supply: With minimal speculative construction, incremental demand should translate more directly into absorption and reduced concessions in the best buildings. 
• Capital warming, selectively: Sales could pick up from 2025 troughs as price discovery advances and financing terms normalize, but the bid-ask gap will still reward well-located assets with clear leasing stories. 

Bottom line 

2025 marked the transition from “wait and see” to “sign and scale”—not everywhere, and not all at once, but decisively in the segments of the market that matter. 

If your 2026 plan involves expansion, consolidation, or a flight-to-quality move, now is the time to line up options and negotiate from strength.