Tenant Tours Surging in Downtown San Francisco
Volume of square footage being toured has jumped 49% since end of 2022.
There are more green shoots sprouting in downtown San Francisco, a place that really needs them.
VTS, which tracks demand by measuring tenants touring properties and looking for space in key US markets, reports that a spike in the number of businesses who are touring available space and negotiation leases is gaining momentum, according to a report in the San Francisco Business Times.
The volume of tenants in the market is up 10% year-over-year and 32% higher than the end of 2022. More impressive is the number of larger tenants looking for sizeable footprints in downtown San Francisco—the volume of square footage being toured is up 49% since the end of 2022, VTS reported.
June 2023 had the largest amount of square footage being toured since VTS began tracking the data in 2018. The lowest point in touring since 2018 was the end of 2022.
VTS tracks “active” demand, measuring demand from companies touring space or negotiating leases. Companies who sign leases or stop touring are no longer active.
“We’re definitely seeing green shoots and some momentum. The first half of the year has dramatically improved, albeit off a low base,” Max Saia, VP of investor research at VTS, told the Business Times.
However, Saia said a full recovery will take years, noting that tenant concessions are still rising in downtown San Francisco.
Demand is being driven by the generative AI tech boom—San Francisco is the leading global AI hub—as well as healthy spikes in demand for tech consulting services as well as the financial and legal sectors.
The generative AI gold rush in San Francisco was the primary driver behind a 10% surge in office demand in the second quarter, according to data from VTS. Generative AI have been hunting for large spaces of more than 50K SF.
Most of the other major urban markets tracked by VTS, including NYC, Los Angeles, Chicago and Boston, showed a quarterly decline in new office demand in Q2 2023.
“There are at least 10 companies now in search of almost a million square feet of office space,” Breed told Bloomberg, in a July interview. “We’re seeing a huge increase in the need for more office space for certain companies. And so that’s going to start taking flight.”
In an interview that was broadcast on NBC Nightly News, Breed declared that San Francisco was the generative AI “capital of the world.”
“They’re coming to San Francisco because this is where the talent is,” the mayor said.
While tech companies in general have been reducing office footprints in San Francisco as they’ve embraced remote work, generative AI startups are highly collaborative enterprises expected to draw workers to large offices.