The effective office vacancy rate in San Francisco hit 30 percent at the end of last month, representing nearly 26 million square feet of vacant office space now spread across the city, which is up from 23 million square feet of vacant space at the end of June, with 18.5 million square feet of un-leased and non-revenue producing space, which is up from 14.7 million square feet of non-revenue producing space at the same time last year, and 7.5 million square feet of space which is leased but unused and being offered for sublet, which now includes Meta’s 435,000 square feet of space at 181 Fremont Street, according to data from Cushman & Wakefield.
For context, there was less than 5 million square feet of vacant office space in San Francisco prior to the pandemic and the office vacancy rate in San Francisco has averaged closer to 12 percent over the long term, with a much smaller base of buildings.
And while the estimated active demand for office space in San Francisco ticked up by 10 percent over the past quarter to 5.3 million square feet of space, which includes around a million square feet of space for AI company growth, that’s compared to over 7 million square feet of active demand in the market prior to the pandemic, at which point there was over 80 percent less vacant space as today and there’s another 2 million square feet of leased, revenue producing space in San Francisco that’s slated to come off lease by the end of this year.
At the same time, while the average asking rent for office space in San Francisco ticked down by 2.5 percent at end of last month to $70.86 per square foot, that’s only 5.3 percent lower than at the same time last year and roughly 15 percent below its 2020-era peak, with landlords’ still fighting to keep asking rents up, the cost of capital having jumped, and another shoe poised to drop.
As always, “while it’s tempting to see, promote or editorialize an opportunity to convert all the vacant office space in San Francisco into housing, the conversion of existing office space to residential use still makes absolutely no economic sense for the vast majority of San Francisco buildings, due to the relative value of each use and the costs of conversion,” as we’ve outlined for over a year and others have finally started to figure out.
And yes, there are higher vacancy rate numbers still making the rounds, but it’s the consistency of the data set and context going back over a couple of decades, as our numbers do, that matters, with an escalation of poor reporting and cross analysis between data sets in the press and splattered across X.