San Francisco Office Space: AI Boost

SAN FRANCISCO — Recently, San Francisco’s reputation as business-friendly has suffered. Several tech and retail companies have reduced their office space in the city. Social media firm X, previously known as Twitter, moved its headquarters to Texas after Elon Musk cited concerns about safety.

Despite these challenges, the rise of artificial intelligence startups has been a positive development. Real estate firm JLL anticipates that San Francisco's vacancy rate, which was 35.4% in the first quarter, will decrease by one to three percentage points in the third quarter, thanks to AI companies expanding or establishing new offices. The last decrease in San Francisco’s vacancy rate occurred in the fourth quarter, with a 0.2% drop, marking the first decrease since the COVID-19 pandemic, according to JLL.

Mayor Daniel Lurie stated that those who doubted the city were mistaken. He attributes the current growth to San Francisco's superior ecosystem.

Business X, formerly Twitter, is closing its San Francisco headquarters and relocating some employees to San José and Palo Alto, which is another setback for the city. JLL reports that AI leases in San Francisco's commercial real estate market have increased from two in 2020 to 167 in the first quarter of 2025. The office space occupied by AI companies has also increased, reaching 4.8 million square feet in 2024, up from 2.6 million in 2022, according to JLL.

Alexander Quinn, senior director of economic research for JLL’s Northwest region, noted that the Bay Area's talent pool, entrepreneurial environment, and venture capital ecosystem make it a leader in the field. Analysts say AI companies are drawn to San Francisco because of its concentration of talent. The city is home to AI companies like OpenAI and Anthropic, which attracts other businesses seeking collaboration. The Bay Area also boasts universities like UC Berkeley, UC San Francisco, and Stanford University, which attract both entrepreneurs and researchers. Venture capital firms are investing heavily in AI, supporting office and staff growth. Research firm CB Insights reported that OpenAI secured the world’s largest venture capital deal last quarter, raising $40 billion. This investment brings ChatGPT’s valuation to $300 billion.

OpenAI leases approximately 1 million square feet across five locations in San Francisco and employs around 2,000 people there. Earlier this year, the company opened its new headquarters in Mission Bay, leasing the space from Uber. Chris Lehane, OpenAI’s vice president of global affairs, said that the company was founded as a nonprofit research lab in 2015, and its team was drawn to San Francisco for the same reasons as previous generations of technologists. Lehane said that San Francisco is a place where people are open to new and unorthodox ideas.

Databricks, valued at $62 billion, is also expanding in San Francisco. In March, Databricks announced plans to move to a larger space in the Financial District next year, increasing its office footprint to 150,000 square feet and more than doubling its San Francisco workforce in the next two years. The company has committed to hosting its annual Data + AI Summit in the city for five more years. CoStar reports that Databricks currently occupies 57,934 square feet at its San Francisco office in the Embarcadero.

Databricks’ co-founder and vice president of engineering Patrick Wendell stated that San Francisco attracts AI talent and is a desirable city for employees. He added that the company is expanding where its employees are.

Wendell said that several years ago, his company considered expanding in San Francisco. At the time, there was uncertainty about the return to offices after the pandemic, and some businesses expressed concerns about safety and cleanliness. Wendell said that the company decided to invest more in the city after receiving assurances from city leaders.

Lurie, who defeated incumbent mayor London Breed last November by campaigning on public safety, said that his administration is focused on public safety and creating conditions that show the city is open for business. He said that his administration has to create the conditions for arts and culture, small businesses, innovators and entrepreneurs to thrive.

Laurel Arvanitidis, director of business development for San Francisco’s Office of Economic and Workforce Development, said that the city’s policy and tax reforms have helped attract and retain businesses, including an office tax credit offering up to $1 million for new or relocating businesses.

Mayor-elect Daniel Lurie announced on social media that cryptocurrency exchange Coinbase is reopening an office in San Francisco after a four-year absence. Coinbase Chief Executive Brian Armstrong responded to the mayor’s post, stating that while there is still work to be done to improve the city, the mayor’s efforts have been noticed and appreciated.

According to a source, Nvidia is also seeking office space in San Francisco. Nvidia declined to comment. Nvidia Chief Executive Jensen Huang said last month onthe Hill & Valley Forum podcast that San Francisco is thriving again because of AI. He added that most people had left San Francisco.

However, San Francisco faces ongoing challenges as companies encourage employees to return to the office. While the street environment has improved, maintaining progress is crucial. Lurie said his administration inherited the largest budget deficit in the city’s history, which they must address. His administration aims to ensure that streets and public spaces are clean, safe, and inviting.

Lurie stated that while there is work to be done, the city is on the rise.