At least one office market is currently experiencing a remarkable rebound, thanks in large part to the growth of artificial intelligence (AI) companies. This sector is one of the few in the city that is growing dynamically. It provides an encouraging glimpse into the future of commercial real estate. Incredibly, over the last 12 months, AI companies have rented 1.6 million square feet of commercial space. That brings their total occupancy in the city to an almost-unreal 5 million square feet.
One of the major players in this recent movement is Waterfront Plaza, a five-building campus that covers 442,000 square feet. The tenant mix within Waterfront Plaza is often a bellwether for wider economic trends. It is a constant reminder of the fickle and fluid nature of office space demand. Second, OpenAI snags the limelight as one of the most dominant companies within the AI sector. Currently, it is in the midst of a dramatic expansion of its presence in Mission Bay.
According to commercial real estate services firm CBRE, these AI startups are on pace to lease an astounding 21 million square feet of office space. Such expansive growth is realizable in as little as five years! That growth trajectory is projected to have a tremendous trickle-down effect on San Francisco’s broader economy. Analysts are encouraged by the wave of such companies. They are confident this could go a long way towards reducing the city’s appalling 35.8% current vacancy rate, perhaps even halving it.
The Northern Waterfront area was submerged with “for lease” signs post pandemic. Now, it is booming due to a wave of early-stage AI startups. This new vibrant neighborhood shift is inspired by the past. It provides the foundation for the development of tens of thousands of jobs for local residents. Colin Yasukochi, a CBRE analyst, emphasizes that the emergence of AI startups could fundamentally alter the vibrancy of downtown San Francisco.
