San Francisco, CA
San Francisco's AI boom can't stop real estate slide, as office vacancies reach new record
Artificial intelligence has been a big boon for San Francisco real estate. But not enough of one to make up for the broader struggle across the market.
The vacancy rate for San Francisco office space reached a fresh record of 34.5% in the second quarter, according to a report Monday from commercial real estate firm Cushman & Wakefield. That’s up from 33.9% in the first quarter, 28.1% in the same period a year ago and 5% before the pandemic.
Meanwhile, the average asking rent dropped to $68.27 per square foot in the quarter, the lowest since late 2015, down from $72.90 a year earlier and a peak of $84.70 in 2020.
San Francisco is reeling from the twin challenges of bringing people back to the office after the Covid pandemic and a slowdown in the tech market that’s led to mass job cuts across the industry. Tech companies have laid off more than 530,000 employees since the start of 2022, according to the website Layoffs.fyi, with major downsizing at Alphabet, Meta, Amazon, Tesla, Microsoft and Salesforce.
Softening the blow of late has been the soaring popularity of generative AI and the decision by fast-growing startups to open large offices in San Francisco.
OpenAI, the market leader with a private valuation that’s topped $80 billion, announced in October that it was leasing about 500,000 square feet of space in the Mission Bay neighborhood, the biggest office lease in the city since 2018. Robert Sammons, senior research director at Cushman & Wakefield, said OpenAI is continuing to look for more space in the city.
Also last year, OpenAI rival Anthropic subleased 230,000 square feet at Slack’s headquarters. And in May of this year, Scale AI signed a lease for a reported 170,000 to 180,000 square feet of space in Airbnb’s office building.
“San Francisco is certainly the center of AI, but AI is not going to save the San Francisco commercial real estate market,” Sammons said. “It will help.”
While richly capitalized AI startups are signing large leases for new space, the bigger trend is that tech companies, law offices and consulting firms are looking to reduce their footprint when existing leases come up, Sammons said, reflecting the widespread move to hybrid work.
In many cases, companies are looking to relocate to higher quality space in more desirable parts of the city, because prices have come down and employers need to be near restaurants and shops to get staffers to come back, Sammons added.
“The best quality trophy space continues to perform well, because tenants want to be in the best locations with the best amenities around them,” Sammons said.
Some of the city’s top employers, including Salesforce, Uber, Visa and Wells Fargo, have brought employees back to offices for part of the week. That’s helped in the financial district, where the vacancy rate is still 34.2% on the north side and 32.7% on the south side at the end of the quarter. In SoMa, which historically was a popular area for venture-backed startups, the vacancy rate is almost 50%.
SoMa is further away from mass transit options and has also been hurt by large retail departures. Vacant office space across San Francisco for the quarter totaled 29.6 million square feet, Cushman & Wakefield said.
The firm said in its report that there are positive signs in the market, with absorption poised to improve in the second half and office job numbers stabilizing following a steep drop-off. But Sammons said it looks like there’s more room for rents to fall and for vacancies to rise. Uncertainty surrounding the upcoming presidential election may be a factor delaying new leases, he said.
“Sometimes tenants postpone making decisions when there are major elections,” he said.
WATCH: Commercial real estate vacancies in San Francisco are at an all-time high
San Francisco, CA
St. Anthony's Foundation serves Christmas Day meals in San Francisco
San Francisco, CA
San Francisco hotel workers agree pay rise after 3-month strike
What’s New
Hilton hotel workers in San Francisco voted on Christmas Eve to approve a new union contract after a 93-day strike, according to the Unite Here Local 2 union.
The union, which represents about 15,000 workers in the region, announced that the deal settles the last of the city’s 2024 hotel strikes, covering approximately 900 Hilton workers.
Newsweek has contacted Unite Here Local 2 and Hilton via email for comment.
Why It Matters
The new contracts after this year’s strikes establish significant improvements in wages, health care and workload protections for workers at Hilton, Hyatt and Marriott-operated hotels.
The agreements conclude months of labor unrest that involved thousands of workers and disrupted San Francisco’s hotel industry.
What To Know
Hilton workers voted 99.4 percent in favor of the agreement on Christmas Eve, which includes a $3 per hour immediate wage increase, additional raises, and protections against understaffing and increased workloads.
The four-year contract preserves affordable union health insurance and provides pension increases. The deal covers workers at Hilton San Francisco Union Square and Parc 55, with 650 workers having actively participated in the strike.
This agreement follows similar contracts reached with Hyatt workers on Friday and Marriott workers last Thursday, covering a total of 2,500 workers who had been on strike since late September.
What People Are Saying
Bill Fung, a housekeeping attendant at Hilton San Francisco Union Square for 29 years, said: “These 93 days have not been easy, and I’m so proud that my coworkers and I never gave up. We stood together through the rain and cold, and even though there were some hard days, it was all worth it. We will go back to work with our health care, good raises, and the confidence of knowing that when we fight, we win.”
Lizzy Tapia, President of Unite Here Local 2, said: “Hilton, Hyatt, and Marriott workers refused to give up their health care or go backwards – and we proved on the picket line that we’re not afraid of a tough fight. As contract talks begin with the city’s other full-service hotels in the new year, they should know that this is the new standard they must accept for their own employees.”
San Francisco Mayor-elect Daniel Lurie said on X: “All those that have been out on strike will be back to work, and just in time for Christmas. So, things are looking bright as we head into 2025.
What Happens Next
Unite Here Local 2 said it would push for other full-service hotels in San Francisco to adopt the same standards established by the Hilton, Hyatt, and Marriott agreements when contract negotiations resume in 2025.
San Francisco, CA
San Francisco hotel workers approve new contract, ending 3-month strike
SAN FRANCISCO — San Francisco Hilton hotel workers who have been on strike for the past three months voted Tuesday to approve a new union contract.
The approval by Unite Here Local 2 in San Francisco settles the last of three hotel strikes in San Francisco this year, union officials said.
The strikes at Marriott, Hyatt and Hilton hotels throughout the city began in the fall. Marriott workers reached agreements on Thursday, with Hyatt doing the same on Friday.
San Francisco Hyatt Hotel union workers unanimously approve new contract
The Hilton agreement is the same as those ratified by striking Hyatt and Marriott workers last week, according to Ted Waechter, spokesperson for the Unite Here Local 2 union.
The agreement applies to about 900 workers, 650 of which have been on strike for over three months, according to Waechter. The hotels include the Hilton San Francisco Union Square and about 250 workers at Hilton’s Parc 55 hotel, who had been prepared to go on strike.
All the deals with hotels include keeping the workers’ health plan, wage increases, and protections against understaffing and workload increases.
Many of the 2,500 hotel workers had been striking for about 93 days, picketing daily in Union Square, which is the site of a Hilton and the nearby Grand Hyatt on Stockton Street.
SF Hyatt Hotel union workers on strike to vote on ratifying tentative agreement for new contract
“These 93 days have not been easy, and I’m so proud that my coworkers and I never gave up,” said Bill Fung, a housekeeping attendant at the Hilton San Francisco Union Square for 29 years. “We stood together through the rain and cold, and even though there were some hard days, it was all worth it. We will go back to work with our health care, good raises, and the confidence of knowing that when we fight, we win.”
Hilton media representatives did not immediately respond to a request for comment.
San Francisco Mayor-elect Daniel Lurie on Tuesday issued a statement welcoming an end to the strike, saying it came just in time for the holiday season and allows workers to return to work for key events such as the JP Morgan Health Care Conference and NBA All-Star Game.
Unite Here Local 2 represents about 15,000 hotel, airport and food service workers in San Francisco and San Mateo counties and represented the striking hotel workers.
Copyright 2024 by Bay City News, Inc. Republication, re-transmission or reuse without the express written consent of Bay City News, Inc. Is prohibited.
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