San Francisco now at 35% office vacancy rate, highest ever recorded: data

SAN FRANCISCO (KGO) — The skyline of San Francisco’s Financial District is about as picturesque as it gets. An area that was bustling with people several years ago, but one that according to the numbers, is now more vacant than ever.

“Right now in downtown San Francisco, we have a vacancy rate of a little over 35% which is the highest that we’ve ever recorded in the history of San Francisco,” says Colin Yasukochi who is an executive director of the tech insights center at CBRE, which focuses on the tech industry and how it affects commercial real estate. Yasukochi says that office vacancy numbers in San Francisco were 3 to 4% pre-pandemic, meaning we’ve seen more than a 30% increase and that trend may continue.

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“We think that the vacancy rate will probably creep up some more in 2024, probably at least through the first half of the year. I would say because there still are firms who are consolidating and reducing the amount of office space they have,” said Yasukochi.

“The challenge still remains – remote work and the city’s reliance on tech as it’s largest industry and those tech workers, they’ve been working from home for a very long time and many of those businesses are operating successfully from home,” said Jeff Bellisario of the Bay Area Council. Bellisario says homelessness, crime, public safety, and all around cleanliness are still the top concerns among current and potential San Francisco employers. He also says one thing is true.

“It’s not a doom loop, right? The numbers don’t necessarily suggest that. A doom loop would have high unemployment, it would have businesses running to other cities. That’s not where we are but we’re not in a spot where we are thriving and succeeding, we’re kind of surviving,” said Bellisario.

While companies like Nordstrom, Cinemark, and Old Navy have closed retail locations in the city, Bellisario says San Francisco business license data shows that overall the city is no longer losing more companies than it’s gaining.

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Still though, retail vacancy rates have risen to above 18% in Union Square.

Kazuko Morgan of Cushman and Wakefield says businesses are opening up and good news is on the horizon.

“There are a number of leases that have been signed and not been announced that will probably be forthcoming next year. We have a fair amount of tenants that are under construction so that’s going to add to the vibrancy as well,” said Morgan.

Morgan says that workers going back to the office and more conventions would both help retail; but the positive image of San Francisco must also get out there too.

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“Our biggest issue I think has just been the media backlash with the media throwing us under the bus, and I think that is probably been one of the toughest things we have had to deal with,” said Morgan.

ABC 7 News reporter J.R. Stone responded by saying, “People go and take video of dozens of people running out of a store and all of a sudden you see Walgreens close multiple locations and CVS close multiple locations. I do think there is something to be said in that there are actual problems.”

“Yes there are actual problems, those problems exist in every city, every shopping mall, even some of the best with the best of security and your classic high-end luxury,” responded Morgan.

Politicians have talked about the recent interest in San Francisco from artificial intelligence companies. Those we talked with said that while that is a definite positive going forward, those AI companies would take up only a small portion of the millions of square feet of vacant space available.

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