Today, San Francisco’s beleaguered office market is described as having a “remarkable recovery.” The rapid expansion of artificial intelligence (AI) companies is pushing this transformation. AI companies have become one of the few industries keeping the city booming. Last year, they absorbed a record 1.6 million square feet of new office space. The recent boom in demand caused a historical jump in AI startups. As of today, they’ve outgrown this space and now call over 5 million square feet home across the city.
Completed in 1990, the five-building Waterfront Plaza campus, totaling 442,000 square feet, is a textbook example of the changing tenant profile spurred by finance-related economic cycles. The office market, in particular, has been hit hard. Early-stage AI startups are bringing new vitality to the Northern Waterfront, an area that was dotted with “for rent” signs in the wake of the pandemic in 2020.
OpenAI’s role in the overall AI market is very significant. Yet, it takes up a quarter of all the space that AI companies rent in San Francisco. With the company recently doubling down on its footprint in Mission Bay, cementing its presence even deeper into the fabric of the city. Colin Yasukochi, a CBRE analyst, is convinced that AI startups are in the midst of tremendous expansion. This expansion will further improve the vitality of downtown San Francisco. He noted that these companies are returning life to once-empty buildings. They share the promise of increasing rail access in the region, while creating tens of thousands of jobs in the corridor.
CBRE is forecasting a bright future for San Francisco-based AI startups. In the next five years, these companies could occupy as much as 21 million square feet of office space! Even still, this expansion would almost fully cut their current 35.8% vacancy rate in half. Their arrival is part of a larger, city-wide trend towards innovation, technology, and an overall “coolness” that has taken hold of this city.
The impact of AI firms on the office market is particularly noteworthy given the mixed economic conditions faced by other sectors. Even as other sectors struggle to adjust to post-pandemic realities, AI companies have become one of the brightest lights of growth and promise. We are confident that their impact will help realize a much more lively, colorful, interesting urban condition.