S
an Francisco's office vacancy rate has hit a new high, reaching 37.3% in the third quarter, according to preliminary figures from CBRE. This marks a consecutive increase since early 2020 and surpasses the previous record. However, the number of available offices remains relatively stable at 39.1%, suggesting that the market may be approaching peak vacancy.

    The jump in vacancy can be attributed in part to X's departure from its 460,000-square-foot headquarters, which has contributed significantly to the empty space. Despite this, new leasing activity has partially offset the impact of X's exit, with tenants continuing to shed more offices than they lease. Net absorption was a negative 550,000 square feet.

    However, Colin Yasukochi from CBRE notes that the stagnant availability rate is a positive sign for the market. He believes that stabilized supply levels and increased demand will start to bring vacancy down in the quarters ahead. In fact, top-quality offices are already seeing a decrease in vacancy rates. This year's leasing activity is on track to be the best since 2019, with artificial intelligence tenants accounting for 15% of all leasing activity.

    CBRE is tracking 27 AI tenants seeking 1.1 million square feet of space, and among the deals that could move the needle is OpenAI's bid to lease a 318,000-square-foot office building. The official numbers for vacancy and availability will be released in coming weeks, providing further insight into the San Francisco office market.