The Bay Area is set to make an office leasing comeback
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In an encouraging sign for San Francisco, a new report finds that the Bay Area claimed 11 of the largest U.S. office leases in 2024.
Why it matters: Though San Francisco's office vacancy rate remains high, experts tell Axios the leasing activity reflects long-term investments in the region and could help drive downtown's recovery by boosting foot traffic.
Driving the news: The Bay Area was the third leading market behind Manhattan and Washington, D.C., for the share of the U.S.'s largest 100 office leases of 2024, per a recent report from real estate firm CBRE.
- The 11 leases it claimed totaled 3.37 million square feet, with four in San Francisco and seven in Silicon Valley.
- Tech companies signed 10, while a life sciences company signed the other.
What they're saying: "The tech industry's new growth cycle now underway has created more hiring opportunities, leading to companies expanding their office footprints," Colin Yasukochi, executive director of CBRE's Tech Insights Center, said in a news release.
- "Leasing activity by the tech sector is still below pre-pandemic levels, but its strong return positions the Bay Area's office market for recovery in the next several years."
State of play: Tech companies committed to more than 8 million square feet in Bay Area office leases last year.
- That's half of all square footage leased and more than double any other business sector's leasing activity.
The big picture: Last fall marked a shift as momentum associated with generative AI progressed to increases in hiring, new leases and return-to-office mandates, tax and advisory firm KPMG San Francisco managing partner Chris Cimino told Axios.
- That includes San Francisco city workers, whom the mayor recently ordered to be in the office four days a week.
Yes, but: Layoffs continue to affect tech workers across the Bay Area.
What we're watching: Many companies are prioritizing building infrastructure and location over lower costs when making leasing decisions, Yasukochi previously told Axios.
- They're increasingly willing to spend the same amount on rent for less space if it means a higher-quality office environment that can attract and retain employees.
The bottom line: The growth of AI activated the tech sector's leasing momentum in 2024. That trend is expected to continue in 2025.