T
ech office leasing in San Francisco is expected to reach 3 million square feet this year, a modest increase from last year's 3.08 million but still significantly lower than the pre-pandemic level of 6.2 million in 2019. The city's tech sector has been slow to recover from the shift to remote work at the start of the pandemic, with leasing plummeting to 820,000 square feet in 2020.

    However, a surge in leases by artificial intelligence firms is helping to drive growth, with AI companies accounting for a significant portion of leasing activity. San Francisco and Silicon Valley were the most active U.S. markets for AI leasing in the third quarter, according to CBRE, which also reported that the Bay Area snagged 76% of all AI venture capital funding in the first half of the year.

    CBRE's Colin Yasukochi is optimistic about the future, predicting that 2024 will be the highest year of leasing by tech companies since 2019. Max Saia from VTS agrees, saying that demand fundamentals in the San Francisco office market are improving and that people are starting to see the city as a more attractive option again.

    Across the U.S., tech companies leased 9.9 million square feet of offices in the third quarter, the highest level since the end of 2021. Despite this growth, office vacancy in San Francisco remains high at over 37%, with AI firms helping to drive leasing activity and potentially paving the way for a stronger recovery in the coming year.