San Francisco office vacancies hit all-time high despite AI boom in Silicon Valley
OpenAI, the company behind ChatGPT, is leasing a significant amount of office space in the Mission Bay section
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San Francisco commercial real estate is taking a hit as office vacancies reach a new all-time high.
Real estate firm Cushman Wakefield reported that vacancies notched 34.5% in the second quarter, which is up from 33.9% reached during the prior three-month period.
A year ago, the office vacancy rate was at 28.1%, according to the firm.
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Coit Tower and the downtown skyline on June 5, 2024, in San Francisco. (Loren Elliott / Getty Images)
The struggle to fill office space comes despite the fact that the artificial intelligence boom is giving new life to Silicon Valley.
In fact, according to Cushman Wakefield, the artificial intelligence companies have driven the leasing activity over the past year.
Heavy hitters in the AI race, like OpenAI, the AI startup behind ChatGPT and reportedly the most funded AI firm, are buying up a significant amount of space in the city, which the firm says remains the center of the AI revolution.
OpenAI, in particular, made headlines when it announced plans last fall to lease roughly 500,000 square feet of office space in the Mission Bay neighborhood.
According to the firm, companies based in the Bay Area absorbed 42.4% of global generative AI venture capital funding in the first half of the year. About 21 of the top 50 deals took place in the Bay Area, according to the firm.
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The firm noted that venture capital spending in the city as well as the region "remains the bright spot for the economy."
OpenAI offices, in the Mission District of San Francisco, on May 31, 2024. (David Paul Morris/Bloomberg via / Getty Images)
It's an about-face from a time when the city saw scads of people leave as concerns over the high cost of living and quality of life grew, and tech companies started to shed their workforce after over-hiring during the pandemic.
The shift to remote work during the pandemic also contributed to this exodus.
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On top of the AI boom, many employees working for major tech behemoths, are also coming back to the area as companies, like Meta, mandate in-office work. Even Google cracked down on its work-from-home policies last summer, requiring employees to be in the office at least three days a week.
While office job numbers have begun to stabilize, they are still down sharply from their record high last year due primarily to tech layoffs, according to the real estate firm.