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San Francisco's AI boom can't stop real estate slide, as office vacancies reach new record

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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.

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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.

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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.

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“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



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3-alarm fire burns San Francisco Tenderloin residential building

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3-alarm fire burns San Francisco Tenderloin residential building



A large fire burned at a six-story residential building in San Francisco’s Tenderloin District early Friday morning, leaving dozens displaced, officials said.

The fire started at around 3 a.m. at a building on Golden Gate Avenue near Taylor and Market streets, adjacent to the Golden Gate Theatre. The San Francisco Fire Department said the fire started on the top floor and reached three alarms, spreading to the attic and roof of the building. Over 100 firefighters at the scene were able to prevent it from spreading to lower floors and nearby buildings, the department said.

Multiple people were rescued and self-evacuated, and a total of 45 residents were displaced, but there were no injuries, the department said. Two cats were also rescued, one that was treated by medics at the scene and another cared for by Animal Control.

Evacuated residents were provided temporary shelter at the corner of Golden Gate and Jones Street aboard a Muni bus. The Red Cross and other city agencies were called in to assist the displaced residents, the department said.

The fire was contained by 5:30 a.m., and firefighters remained on the scene for several hours. The cause of the fire was not immediately known.

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San Francisco firefighters to retire uniforms linked to cancer

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San Francisco firefighters to retire uniforms linked to cancer


San Francisco firefighters are finally getting the protective gear they were promised after years’ long research revealed certain chemicals used in traditional firefighter uniforms can cause cancer.

“What none of us could have known is that some of the very gear designed to protect us was quietly harming us,” said San Francisco Fire Chief Dean Crispen, who spoke alongside dozens of first responders on Thursday as he announced the city’s $3.6 million plan to provide protective equipment to all frontline firefighters by the end of the year.  “This is a joyous occasion for our city.”

San Francisco Fire Chief Dean Crispen was flanked by the mayor, state and local lawmakers, and dozens of first responders on Thursday when detailing the city’s plans to provide new, non-PFAS uniforms to frontline firefighters across San Francisco.

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The San Francisco fire department, the tenth largest in the nation, has already distributed the redesigned gear to about 80 of its firefighters and hopes to have all 1,100 of its new uniforms in use within the next three weeks – that’s enough protective equipment to provide one uniform to each of the city’s frontline firefighters.  While city leaders hope to eventually purchase a second set of gear, San Francisco firefighters will, for now, need to wash their new gear before returning to work or continue to rely on their old uniform as a backup.

“Public safety relies on the people who stand between danger and our residents,” Mayor Lurie told the crowd during Thursday’s announcement.  “Firefighter health must always be at the center of our decisions.”

San Francisco’s efforts stem from a first-in-the-nation ban that local lawmakers passed last year, which requires the city to outfit firefighters with new uniforms by July 2026. Over the years, studies have shown the jackets and pants firefighters across America have long relied on to keep safe during emergencies are made with materials proven to cause cancer. 

These so-called “PFAS” materials, often referred to as ‘forever chemicals’ because of their reluctance to breakdown, have long been used to bolster the reliability of firefighter clothing by helping to repel flammable liquids and reduce temperatures, even in extreme heat.  Researchers, however, have found the compounds to be harmful when absorbed through skin. While the precise level of PFAS exposure for firefighters and the associated health risks are still being studied, the compounds have been linked to cancer and other negative health effects impacting cholesterol levels and the immune system, according to the Centers for Disease Control and Prevention (CDC).

PFAS aside, the inherit health risks of firefighting, including prolonged exposure to smoke and ash, led the World Health Organization to deem the occupation a “carcinogen.”  Yet, some fear the very safety uniforms firefighters have come to rely on for protection could also be making them sick. 

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Female firefighters in San Francisco are six times more likely to develop cancer compared to the national average, according to the San Francisco Firefighters Cancer Prevention Foundation.

Female firefighters in San Francisco are six times more likely to develop cancer compared to the national average, according to the San Francisco Firefighters Cancer Prevention Foundation.

In San Francisco, female firefighters have a six times higher rate of breast cancer than the national average, according to the San Francisco Firefighters Cancer Prevention Foundation. More than 400 firefighters in San Francisco have been lost to cancer over the past 20 years, according to the city’s fire department.

“The cost of inaction is measured in funerals,” said Stephen Gilman, who represents the local chapter of the International Association of Fire Fighters (IAFF). “The reward of action is measured in lives saved.”


The cost of inaction is measured in funerals.

Stephen Gilman, International Assoc. of Fire Fighters (IAFF)


While materials laced with PFAS have been shown to pose safety risks, so has fire gear that has been manufactured without it.  Last year, the NBC Bay Area Investigative Unit reported on research from North Carolina State University that found non-PFAS fire equipment to be less breathable and more flammable than traditional uniforms made with PFAS.

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“We don’t want to just trade one hazard for another,” Dr. Bryan Ormand told the Investigative Unit back in May 2024.  “We’re introducing a potential hazard for flammability on the fire scene where firefighters didn’t have that before.”

The San Francisco Board of Supervisors is scheduled to vote Tuesday on a city-wide ban of what are known as ‘PFAS’ or ‘forever chemicals,’ but replacement options still aren’t widely available and those that are seem be raising new safety concerns. Senior Investigator Bigad Shaban reports.

Milliken & Company, the textile firm that made the material for San Francisco’s latest uniforms, said the new type of gear “meets or exceeds” all industry standards for “breathability and thermal protection.” 

“We refused to trade one hazard for another,” Marcio Manique, senior vice president and managing director of Milliken’s apparel business, noted in a written statement.

“It meets the strictest performance standards without adding weight or compromising breathability – giving firefighters exactly what they asked for.”

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We refused to trade one hazard for another

Marcio Manique, senior vice president and managing director of Milliken’s apparel business


In San Francisco, the new gear underwent a 90-day test trial with 50 of the city’s own firefighters.

“What we did was we actually went through a really comprehensive testing process,” Chief Crispen told the Investigative Unit.  “It went to the lab and received testing and everything came back great, so we feel strongly about this product.”


Contact The Investigative Unit

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Gas explosion in San Francisco Bay Area damages homes, sends heavy smoke into air

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Gas explosion in San Francisco Bay Area damages homes, sends heavy smoke into air


SAN FRANCISCO — A gas explosion started a major fire in a San Francisco Bay Area neighborhood on Thursday, damaging several homes and sending heavy smoke into the air.

Local outlets said there are possible injuries from the Hayward explosion.

A spokesperson with Pacific Gas & Electric Co. said a construction crew damaged an underground gas line around 7:35 a.m. The company said it was not their workers.

Utility workers isolated the damaged line and stopped the flow of gas at 9:25 a.m., PG&E said. The explosion occurred shortly afterward.

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