San Francisco leads nation in office occupancy losses
Office vacancies nationwide hit a record high in the fourth quarter of last year, with the San Francisco metro area leading the way in square feet vacated, according to the latest data from Moody's Analytics.
Why it matters: San Francisco's downtown and office vacancies are key indicators of how well the city is recovering from the pandemic.
What's happening: Between October and December, San Francisco led metro areas with an office occupancy loss of 2.4 million square feet, per Moody.
- That resulted in an office vacancy increase of 5% and a 3.6% decline in rent.
Yes, but: It's not all doom and gloom.
- This week, tech company Rakuten opened its new 29,000-square-foot office space at 300 Mission St.
- In October, ChatGPT-maker OpenAI subleased nearly 500,000 square feet of office space in San Francisco.
The big picture: The stickiness of hybrid work arrangements "muted office demand," per the report, which says 2023 was "the most downbeat" year in the office sector since the global financial crisis.
- The national vacancy rate of 19.6% in Q4 surpasses previous peaks last reached in 1991 and 1986.
What's next: Real estate firm CBRE expects AI companies to continue to drive office demand in San Francisco, where such companies accounted for 28% of the total leasing activity in the city, the San Francisco Chronicle reports.
- But expect occupancy losses to continue through the first half of this year before stabilizing "as economic conditions improve and interest rates decline," CBRE's Colin Yasukochi told the Chronicle.
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