View the San Francisco for Wednesday, March 19, 2025
OpenAI subleased the buildings at 1455-1515 3rd St. in Mission Bay, pictured above, from Uber in October 2023. The artificial-intelligence boom is likely to be a boon for San Francisco’s struggling real-estate market, according to a recent report.
The City has become the epicenter for generative AI, the version of the technology that can mimic human-created text, images, speech and software code. Thanks to the money flowing into and the growth of that sector, companies within it are in the market for space, according to the new report from real-estate brokerage Cushman & Wakefield. After collectively leasing 2.6 million square feet of office space in San Francisco between 2022 and 2024, companies in that sector — which include OpenAI, Anthropic and Databricks — will triple that amount between the end of last year and the end of 2026, Cushman forecast in the report.it set last year, said Robert Sammons, a senior director of research at Cushman. Thanks in part to that demand, the brokerage is projecting the market this year and next will see more space leased than vacated, which hasn’t happened on a full-year basis “San Francisco … has always been such a boom-and-bust market, more so than a lot of other places,” Sammons said. “And it feels as if we’re in the early stages of another boom.” Other real-estate brokerages are also expecting strong office demand in San Francisco in coming years from AI companies, although their forecasts are not as bullish as Cushman’s. JLL, for example, is forecasting that AI companies will lease 7 million square feet of additional space in San Francisco between the beginning of this year and the end of 2030. Cushman based its forecast on trends in that sector and demand for office space it’s already seeing from generative AI companies. Last year, such companies leased 1.15 million square feet in San Francisco, accounting for 15% of all the office space leased in The City, according to the brokerage.One Sansome at the corner of Sutter and Sansome streets in San Francisco on Monday, March 10, 2025.Given the number of generative AI companies in San Francisco and the amount of funding they’ve raised, Cushman said it expects many more deals in coming months. Globally, venture firms invested $56.2 billion in generative-AI companies last year, according to Cushman’s report, citing data from industry research firm PitchBook. Of that, 52% went to companies based in San Francisco. Combined, Bay Area companies accounted for 82% of the funding total. The Bay Area is home to 825 generative-AI companies, according to Cushman’s report; 466 of those are based in San Francisco, Sammons said. By contrast, the New York metro area, which is the second-largest center globally for the technology, has 237 generative-AI businesses, according to Cushman.“These are companies that could still be in someone’s apartment all the way up to the big players,” he said. Despite participating in the same sector, those companies, as they expand, have different space desires, depending on their sizes and outlooks, he said. Many of the smaller startups are just looking for the best sublease deals they can find — the best space at the lowest price, he said. Most are looking for space that’s already finished out. They “want that ‘plug-and-play’ space, where they can just move right in and get started,” Sammons said. “They don’t want to wait for build-out. They don’t necessarily want to pay for build-out or have it paid for them ... by landlords.” Such companies are looking for places where they can find anywhere from 3,000 to 10,000 square feet of space, Sammons said. Those could be in one of the older brick or timber buildings in the Mission or the South of Market area, where previous generations of startups have set up shop or in Jackson Square or the Northern Waterfront, he said. But they’re also looking at space in more traditional mid- or high-rise office buildings in the central business district, he said. Another popular location is Mission Bay, according to Chris Pham, a senior analyst at JLL. Partly that’s because OpenAI is there, but it’s also because many venture firms have offices in that area, he said. Another draw is that if offers easy access to Interstate 280 and Caltrain, said Alexander Quinn, JLL’s senior director of research for Northern California. Many of these smaller AI startups are looking for deals that are three years or less, Sammons said. Many don’t have a sense yet of how big they’ll be or are already aiming to sell themselves to bigger players in the market.Although three years is much shorter than the terms of traditional leases, landlords are generally accommodating such demands, he said. Indeed, 63% of all leases signed by generative AI companies last year were for less than three years, according to Cushman’s report. Just 11% were for longer than five years. Cushman rival CBRE is seeing similar trends among smaller AI startups in terms of their demand for real estate space, said Colin Yasukochi, who heads up the firm’s research on tech-industry real-estate demand. Many such companies are looking for space downtown, they’re aiming for deals typically in the two-to-five year range, and they generally want spaces that are built out, Yasukochi said. In fact, they’re willing to pay somewhat higher rents for spaces that are ready to move in, he said, because they know that paying to build out such spaces is ultimately going to cost them more than the extra rent. “Their funders don’t necessarily want them to spend a lot of money on real estate,” Yasukochi said. “They want them to spend money on developing their technology.” Demand from those smaller AI companies is starting to drive the overall market, Quinn said. About two-thirds of the leases signed by AI companies last year were from ones that were signing their first-ever office deals or were moving into newer, typically bigger spaces, he said. About 40% of the AI companies that signed lease deals last year were either seed-stage or Series A companies, meaning they are very early in their development, Pham said. “That’s a pretty remarkable ,” Quinn said. “It shows just the amount of firm formation that’s occurring within The City of San Francisco, the ecosystem that exists here and the growth of that market and expectations of AI.” By contrast, the big players in the generative-AI market are generally looking for recently built buildings, Sammons said. They want to be the only tenants in their structures, if they can, he said.Demand from the generative AI companies is benefitting San Francisco’s office market and economy in multiple ways, he said. Much of the reason for The City’s high vacancy rate is that itsBut workers at generative-AI companies tend to be in the office more often than other tech workers, Sammons said. There’s a sense among such companies that the employees need to be physically together to collaborate, he said. Additionally, the demand for space from such companies is spurring office demand from other businesses, both in the tech sector and without, particularly among companies that provide services to the generative AI businesses, he said. But it’s also coming from non-technology companies that have launched AI divisions, Pham said. About 20% of all workers who have AI expertise are located in the Bay Area. Companies that are trying to ramp up their AI efforts want to be close to that talent, Quinn said.There was a feeling for a while in recent years that the pandemic killed San Francisco’s office market and that it wouldn’t ever get back on track, Sammons said. The uptick in leasing by generative AI is starting to turn that narrative around.“Everything is feeling better,” he said.FILE - A vial of the measles, mumps and rubella vaccine is on display at the Lubbock Health Department Wednesday, Feb. 26, 2025, in Lubbock, Texas. Local public-health experts and leaders said the risk of a measles outbreak in San Francisco remains low as the infectious disease makes a national resurgence thanks to a spate of cases in the Southwest. Officials and epidemiologists contend that infections are highly preventable, with vaccination remaining the best defense. “Measles is often the standard against which we measure any kind of new or different virus or infection,” said Dr. Susan Philip, San Francisco’s health officer. “So there’s a lot of public health work involved with trying to protect our communities from measles, but the best way that individuals can protect themselves and our greater community is through vaccination when it’s recommended.”San Francisco Health Officer Dr. Susan Philip: “We want to remind our residents in San Francisco, please make sure your children have gotten their measles vaccine.”in 2025 as of March 14, according to the Centers for Disease Control and Prevention, a total that exceeds all of last year. All but seven of those cases have been tallied in Texas and New Mexico , the border of which is the site of an ongoing outbreak. At least two people have died in those states, according to data from Texas and New Mexico public-health officials. Those were the first measles deaths in the U.S. since 2015. The World Health Organization declared measles eliminated in the U.S. in 2000, thanks to widespread adoption of the two-dose MMR vaccine that also inoculates against mumps and rubella. A first dose is recommended for children aged 12-15 months and a second for children who are 4-6 years old, said public-health officials from a coalition of 13 Northern California jurisdictions — including San Francisco — in a statement released Friday. Officials said residents born between 1957 and 1969, who might have only received one dose, should look into getting a second one. Philip said none of the five cases recorded in California were in The City, which hasn’t tallied a measles case since 2019. The Northern California officials said Friday the state’s totals were reported after international travel and unrelated to the Texas-New Mexico outbreak. But because of San Francisco’s status as an international travel hub, Philip said, The City must be on alert for travelers carrying the disease to and from different communities. “We want to make sure that people are aware,” Philip said. “We want to remind our residents in San Francisco, please make sure your children have gotten their measles vaccine.” The vast majority of cases in the southwestern outbreak are in people who were unvaccinated, according to Texas and New Mexico officials. This comes following an increase in distrust of vaccines and a decline in their uptake, the latter of which isA sign stands outside of Seminole Hospital District in Seminole, Texas, offering measles testing. Dr. John Swartzberg, an infectious-disease expert with the UC Berkeley School of Public Health, said he fears this current outbreak is just a harbinger of what’s to come. “If people continue not vaccinating their children and themselves, we’re going to start to see other infectious diseases that we can easily prevent,” he said, pointing to mumps and rubella. “Measles will appear first, because it’s so contagious, but it’s telling you that you’ve got a population that could get other infectious diseases that are so easily preventable,” Swartzberg said. UCSF’s Dr. Peter Chin-Hong said that other unintended consequences could be in store. Diseases such as rubella can be very harmful during pregnancy and can lead to more children being born with congenital abnormalities if not screened for properly in communities with low immunity. He said other diseases targeted by childhood vaccinations — including polio and hepatitis B — could have similar resurgences. “It’s kind of a perfect storm,” he said. “You have lower vaccination rates, and you have people who are more vaccine hesitant, and then you had the recent COVID-19 pandemic that even if you wanted to get a vaccine, there were factors that prevented people from getting them on time.” And in communities that don’t have adequate herd immunity of 95% or higher — including parts of Texas where the outbreak is ongoing, and among“It’s like in California: The dry climate doesn’t cause the fires to happen,” he said. “The climate creates a situation, it blows up, and that’s what we’re seeing now.” For diseases such as measles, Chin-Hong said treatment is a challenge. As a result, vaccination is highly important. “The other thing that people can do is really not to panic,” he said. “And then be an advocate, have conversations with people who might be vaccine-hesitant, because the more people that get vaccines — it’s not just a matter of only individual protection, it has community benefit too.” A Waymo self-driving car on Noe Street at Market Street in San Francisco on Wednesday, Nov. 13, 2024. San Franciscans and tourists are one step closer from having the option to take a Waymo to and from the airport. The autonomous-vehicle company last week acquired a long-coveted, first-of-its-kind permit that allows it to gather mapping data at San Francisco International Airport, Mayor Daniel Lurie’s office announced Monday. Waymo can now deploy its robotaxis on the airport’s roads for the first time ever, though only for data-gathering purposes. The permit is active for 30 days starting March 14, though the airport has the option to extend it another 30 days after that. In a statement, Lurie called the agreement an example of “how San Francisco is driving innovation while supporting our economic recovery.” “This mapping permit is an important step toward bringing our service to the millions of people who travel to and from the city every year, many of whom have placed San Francisco International Airport at the top of their service expansion wish list,” Waymo executive Nicole Gavel said in a statement.Despite Waymo’s new mapping permit for SFO, it’s not yet clear when the company’s robotaxis will be able to fully operate at the airport. The permit only authorizes as many as two human-driven Waymo vehicles to drive on airport property at a time. Just Waymo and airport staff are allowed to ride in the vehicles. SFO is located on an unincorporated parcel of San Mateo County, where Waymo still does not have clearance to operate. Since the airport is a federally regulated entity, ride-hailing businesses such as Waymo, Uber and Lyft require a special permit to give rides there., no person can “collect data, coordinates, measurements, photographs, or other information regarding any Airport property, building, or facility,” without written permission of the director due to safety concerns.New SFO Director Mike Nakornkhet called the Waymo mapping permit “an important first step in our comprehensive evaluation of this new transportation mode.”“The safety of our customers is our very highest priority, and this temporary mapping permit is an important first step in our comprehensive evaluation of this new transportation mode,” he said in a statement. The Teamsters Union, which represents ride-hailing and delivery drivers, was also involved in the discussions. Peter Finn, vice president of the Teamsters Western Region, said he was pleased with the result. “This is a template for responsible implementation of new technology that takes into account the impact on safety, jobs and the community, which can be replicated across California,” Finn said. The permit explicitly does not allow the Waymo vehicles to carry commercial goods on airport property. It’s still unclear when Waymo will be able to fully operate at the airport, which has long been one of the company’s top priorities since state regulators gave the firm the green light to charge for rides throughout San Francisco. Waymo has aggressively ramped up its lobbying in San Francisco in recent months; its lobbyists contacted city officials more than twice as much in 2024 as they did in 2023, according to disclosures filed with the San Francisco Ethics Commission.met with Sarah Dennis Phillips — executive director of the Office of Economic and Workforce Development —on Feb. 25 to discuss the mapping permit and the company’s expansion., offering rides in multiple Santa Clara County cities. The Bay Area’s largest city, San Jose, was notably not among them. Waymo’s driverless white Jaguars have become an increasingly common sight across The City. The company has become the nation’s foremost autonomous-vehicle firm since its top competitor, Cruise, exited the market following the fallout from a 2023 incident in which one of its vehicles struck and dragged a pedestrian more than 20 feet in San Francisco.Sorry, your subscription does not include this content.Click and hold your mouse button on the page to select the area you wish to save or print. You can click and drag the clipping box to move it or click and drag in the bottom right corner to resize it. When you're happy with your selection, click the checkmark icon next to the clipping area to continue.This is the name that will be displayed next to your photo for comments, blog posts, and more. Choose wisely!Create a password that only you will remember. If you forget it, you'll be able to recover it using your email address.Forgot Password An email message containing instructions on how to reset your password has been sent to the email address listed on your account.
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