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San Francisco Office Vacancy Hits New Record High

7/09/24

KEY TAKEAWAYS Q2-2024 SAN FRANCISCO OFFICE MARKET
Provided by Cushman & Wakefield

The San Francisco overall office vacancy rate reached another record high in Q2 2024, up 60 basis points (bps) from Q1 2024 and 640 bps from one year ago. It was its smallest quarterly increase since Q4 2021 (20 bps).

The San Francisco Class A office vacancy rate climbed to a record high of 34.5% in Q2 2024, up 100 basis points (bps) from Q1 2024 and 670 bps from one year ago. It was its smallest quarterly increase since Q4 2022 (50 bps).

Sublease vacancy declined, albeit minimally, in Q2 2024. This was its first drop since Q3 2021.

AI companies have driven leasing activity over the past year, though there are other tech, professional and business services taking space as well.

Absorption will improve in the second half of 2024, though it will struggle to move into positive territory.

Top tier buildings will outperform the rest of the market as tenants look to improve upon location and amenities.

Mid-tier buildings will attract some tenants if upgraded; commodity buildings will face obsolescence.

Office job numbers have begun to stabilize, though, are down sharply from their record high last year due primarily to tech layoffs.

A hybrid workplace is expected to be the future of the market; in-office visits Tuesday through Thursday have improved.

Regional transit ridership (Caltrain / BART) will continue to struggle, though improvements have been made.

VC spending in the city and the region remains the bright spot for the economy; multiple times higher than any other market in North America.




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