Artificial Intelligence has been a big boon for San Francisco real estate but not enough to make for the crisis in the real estate market. According to a report from commercial real estate firm Cushman and Wakefield released on Monday quoted that the vacancy rate for San Francisco office space has reached a fresh record of 34.5% in the 2nd quarter, that’s up from 33.9% in the 1st quarter, 28.1% in the same period a year ago and 5% before the pandemic. However, 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. After the Covid-19 pandemic and a slowdown in the tech market has led to massive job cuts across the industry, San Francisco is facing challenges of bring people back to offices. Tech companies have laid off more than 530,000 employees since the start of 2022, according to the with major downsizing at Alphabet, Meta, Amazon, Tesla, Microsoft and Salesforce.
To reduce the damage further has been the soaring popularity of Generative AI and the decision by fast-growing startups to open large offices in San Francisco. The biggest office lease in the city since 2018 has been announced by OpenAI in October that it was leasing about 500,000 square feet of space in the Mission Bay neighborhood. Open AI has a total market valuation of $80 billion. 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. The bigger trend however reflects that big tech companies, law firms and consulting firms are looking to reduce their presence when the price of leases is high focusing on the widespread trend of hybrid work. 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%.
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