San Francisco's Office Market Could 'Prove Itself' In 2026

San Francisco’s office market began to set itself right in 2025, riding a wave of artificial intelligence-related leasing that allowed the city’s weary boosters a toehold on the long climb back to pre-pandemic momentum.

The healing market has brought some developers back to the city, with major players such as Hines and Lincoln Property Co. in the early stages of office projects. And as 2026 gains momentum, office brokers in the city are hoping for another strong year that cements and defines this progress.

“The momentum in 2025 just really started to show up in data versus vibe,” Newmark Vice Chairman Christina Clark said. “And I think that data is going to continue through the next few quarters and get very healthy, very happy. Statistically, we’ll be able to tell the story that people were feeling at the end of 2024, then we started to see the numbers in 2025, and now it will prove itself in 2026.”

Tenants took 1M SF of office space on a net basis in the third quarter, the fifth consecutive quarter of positive absorption for the city, according to CBRE. The city’s vacancy rate fell by 3.7% during 2025, the largest annual decrease since 2011.

AI is largely responsible for the leasing momentum. Sierra AI signed the largest lease of the fourth quarter, taking 258K SF at 185 Berry St., on the heels of major deals by OpenAI and Nvidia.

But other types of tenants are either leasing new space or renewing their commitments to existing offices. Kirkland & Ellis and DocuSign both renewed their downtown San Francisco leases, while fintech company Carta and fitness-tracker maker Ouraring found new homes.

And the tenants that are looking want their spaces fast.

“What we're seeing with AI and frontier tech companies, and even some professional services firms, is that they want the space in 12 months or ready to be occupied in 24 months,” Clark said. “You don’t have time to wait.”

Still, even with the urgency and the explosive market capitalizations of some of the companies looking for space in San Francisco, there is a clear difference between today and the city’s last boom time.

“There are at least a dozen tenants in the market right now looking for 100K SF, not 500K SF, except for some of the very large companies, like an OpenAI or an Anthropic,” Clark said. “That’s very different from what we saw in the 2010s.”

During San Francisco’s last office heyday, tech giants like Google, Meta and Salesforce took down office space in enormous swaths, in some cases building entire towers measuring 1M SF or more for their swelling ranks.

Today’s tenants are looking for smaller spaces, but they have also honed in on the highest quality the city has to offer, according to Colin Yasukochi, executive director of CBRE’s San Francisco office.

Deals like OpenAI’s move to former Uber space in Mission Bay highlighted the appeal of turnkey, heavily improved offices, Yasukochi said. 

But space where a prior tenant has already invested in improvements is increasingly scarce. As a result, new construction is no longer competing with the city’s entire inventory but instead with a shrinking slice of buildings capable of meeting tenant needs.

Clark said some tenants are already thinking beyond the next lease cycle, but as of Q4, no new office space was in the construction pipeline, according to CBRE.

“What we’re seeing now is companies like private equity firms starting to look that far out, companies that have a little bit more depth,” she said. “I think we’ll start to see in the next few years some of the AI companies thinking bigger, thinking more long-term as they build depth to their portfolio and business.”

That shift has developers ramping up early-stage planning.

Hines filed permits for a tower at 77 Beale St. for what could become San Francisco’s tallest, a roughly 1,225-foot-tall office building that would dramatically reshape the skyline if it moves forward. 

Lincoln Property Co. and McCourt Partners are in talks for a potential redevelopment of the former Golden Gate University campus at 536 Mission St., where plans outline either a 700-foot mixed-use tower or a 752-foot office tower.

Yasukochi said institutional investors are returning after sitting on the sidelines earlier in the downturn.

“Institutional investment financial partners are willing to put their money at risk because they do believe the market has a lot of upside potential,” he said.

On the construction side, early-stage activity is picking up.

“Over the last year and a half, we’ve seen an increase in developers in the private market asking us, as a general contractor, to provide pricing,” Webcor senior executive Tom Soohoo said. “That’s usually an indicator for us that there’s activity.”

Soohoo cautioned that pricing requests don’t necessarily translate into projects moving forward but said the shift marks a clear departure from the period immediately after the downturn.

Still, the gap between interest and execution remains wide. Most proposed projects remain contingent on securing major tenant commitments. Construction timelines, elevated interest rates and lease-up risk remain significant challenges to securing financing.

For now, the data suggests San Francisco’s office market isn't short on space but is increasingly short on the kind of space today’s tenants want, in the size they need, in buildings that can support modern infrastructure without excessive retrofit costs.

“There was a moment where there were just crickets. Nothing happening,” Soohoo said. “So when we see people reaching out to us to provide updated pricing, that’s optimistic, even if it doesn’t mean a project is going to go.”

Interest is coming from a mix of developers, though the most credible inquiries tend to come from larger, more established players.

“We’ve definitely had our share of big institutional developers reach out, and we’ve also had smaller developers ringing the doorbell,” Soohoo said. “The institutional groups are usually a little more serious. The smaller ones are often just kicking the tires to see if they can get financing.”