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4/10/26
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This 1st Quarter 2026 San Francisco Office Market report provided by CBRE
MARKET SNAPSHOT
• 30.4% Vacancy Rate
• +2.3M Sq. Ft. Net Absorption
• 0 Sq. Ft. Under Construction
• $71.19 Full Service Gross / Lease Rate Existing Properties
• 299K Office-Using Employment San Francisco County
MARKET HIGHLIGHTS
• Record-high net absorption of 2.3 msf lowered the vacancy rate from 32.8% to 30.4%.
• Since vacancy peaked at 36.9% in Q3 2024, more than 5 msf of occupancy growth has occurred. This was the strongest six-quarter run of occupancy growth on record.
• Asking rents increased 3.7% year-over-year to $71.19 FSG. High demand from AI tenants drove double-digit increases in Mission Bay/China Basin and South of Market.
• 4.1 msf was leased in Q1 2026, including nine deals larger than 100k sf., a record high for the market. AI-related companies accounted for 58% of the leasing activity.
• Tenants-in-the-market demand ended the quarter at 7.5 msf, down slightly from Q4 2025 due to many large leases signed.
• Five major investment deals closed, totaling $1.27 bil invested across 2.45 msf.
OFFICE MARKET OVERVIEW
In Q1 2026, the overall vacancy rate decreased from 32.8% to 30.4%, driven by 2.3 msf of positive net absorption. This marked the strongest single-quarter occupancy increase on record. During the past four quarters (Q2 2025 to Q1 2026), San Francisco posted average quarterly growth of 1.1 msf.
South Financial District and Mission Bay/China Basin recorded the largest occupancy gains, fueled by the rapid expansion of Anthropic, OpenAI, and many other AI tenants. Together, these submarkets captured 71% of Q1 2026 growth and 61% of total growth across the last four quarters. As supply in core submarkets tightened amid high demand, spillover activity drove leasing in less competitive submarkets. Yerba Buena registered meaningful occupancy growth, reversing a post-pandemic pattern after occupancy losses in 23 of the prior 24 quarters.
The average direct asking rate increased from $70.43 to $71.19 FSG, reflecting 3.7% year-over-year growth. Driven by heightened AI demand, Mission Bay/China Basin, South of Market, and South Financial District led the year-over-year rent increases, climbing 14.0%, 12.1%, and 5.0%, respectively.
Gross leasing activity reached 4.1 msf, representing the strongest quarter since Q2 2019. Nine deals exceeded 100k sf, establishing a new quarterly market record. Seven of the ten largest deals involved net growth, including four comprised entirely of expansion. AI-related companies accounted for 58% of total leasing activity in the quarter, while non-AI tech companies generated an additional 18% of the leasing volume.
Tenants-in-the-market demand declined from 8 msf to 7.5 msf, due to many large leases signed. Despite the drop, active requirements remained above the 2019 peak of 7.1 msf. Net new demand ended the quarter at 2.8 msf, about 20% higher than the 2011-2019 average.
Five major investment transactions closed during Q1 2026. $1.27 bil was invested across the five deals, which totaled 2.45 msf. The most notable deal was Yoda PLC’s acquisition of the three-building Transamerica Pyramid complex for $922 per sq. ft., the highest price paid for a San Francisco office asset since 2022.
Looking ahead, strong leasing momentum and continued AI expansion should persist through 2026, further lowering vacancy and increasing rents.
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