SAN FRANCISCO — Lately, San Francisco’s picture as a welcoming place for companies has taken a success.
Main tech corporations equivalent to Dropbox and Salesforce decreased footprints within the metropolis by subleasing workplace area, whereas retailers together with Nordstrom and Anthropologie pulled out of downtown. Social media agency X, previously Twitter, vacated its Mid-Market headquarters for Texas, after proprietor Elon Musk complained about “dodging gangs of violent drug addicts simply to get out and in of the constructing.”
Whereas the town stays on the defensive, one brilliant spot has been a increase in synthetic intelligence startups.
San Francisco’s 35.4% emptiness charge within the first quarter — among the many highest within the nation — is anticipated to drop one to 3 proportion factors within the third quarter because of AI corporations increasing or opening new places of work within the metropolis, in response to actual property brokerage agency JLL. The final time San Francisco’s emptiness charge dropped was within the fourth quarter, when it declined 0.2% — the primary time because the COVID-19 pandemic, in response to JLL.
“Individuals needed to depend us out, and I feel that was a nasty guess,” mentioned Mayor Daniel Lurie. “We’re seeing all of this as a result of the ecosystem is best right here in San Francisco than wherever else on the earth, and it’s actually an thrilling time.”
5 years in the past, AI leases in San Francisco’s industrial actual property market had been comparatively sparse, with simply two leases in 2020, in response to JLL. However that’s since soared to 167 leases within the first quarter of 2025. The workplace footprint for AI corporations has additionally surged, making up 4.8 million sq. toes in 2024, up from 2.6 million in 2022, JLL mentioned.
“You want the expertise base, you want the entrepreneur ecosystem, and also you want the VC ecosystem,” mentioned Alexander Quinn, senior director of financial analysis for JLL’s Northwest area. “So all these three issues exist throughout the higher Bay Space, and that permits us to be the clear chief.”
AI corporations are drawn to San Francisco due to the focus of expertise within the metropolis, analysts mentioned. Town is dwelling to AI corporations together with ChatGPT maker OpenAI and Anthropic, recognized for the chatbot Claude, which in flip entice companies that need to collaborate. The Bay Space can also be dwelling to universities that entice entrepreneurs and researchers, together with UC Berkeley, UC San Francisco and Stanford College.
Enterprise capital corporations are pouring cash into AI, fueling workplace and employees development. OpenAI landed final quarter the world’s largest enterprise capital deal, elevating $40 billion, in response to analysis agency CB Insights.
OpenAI leases about 1 million sq. toes of area throughout 5 totally different areas within the metropolis and employs roughly 2,000 folks in San Francisco. The corporate earlier this yr opened its new headquarters in Mission Bay, leasing the area from Uber.
OpenAI started as a nonprofit analysis lab in 2015 and the folks concerned discovered their strategy to San Francisco for a similar motive why earlier generations of technologists and other people pushing the frontier in the USA are drawn to the town, mentioned Chris Lehane, OpenAI’s vice chairman of worldwide affairs in an interview.
“It’s a place the place, once you put out an concept, irrespective of how loopy it might appear on the time, or how unorthodox it might appear … San Francisco is the town the place folks don’t say, ‘That’s loopy,’” Lehane mentioned. “They are saying, ‘That’s a very attention-grabbing concept. Let’s see if we will do it.’”
The inside of OpenAI’s new San Francisco headquarters within the Mission Bay neighborhood. (OpenAI)
Databricks, valued at $62 billion, can also be increasing in San Francisco. Databricks in March introduced it’ll transfer to a bigger area within the Monetary District subsequent yr, boosting its workplace footprint to 150,000 sq. toes and greater than doubling its San Francisco employees within the subsequent two years. It pledged to carry its annual Information + AI Summit within the metropolis for 5 extra years.
The corporate holds 57,934 sq. toes at its present San Francisco workplace close to the Embarcadero, in response to CoStar, which tracks actual property developments.
“San Francisco is an actual expertise magnet for AI expertise,” mentioned Databricks’ co-founder and vice chairman of engineering Patrick Wendell. “It’s a wonderful metropolis for folks to stay and work in and so we actually are simply following the place the staff are.”
A number of years in the past, Wendell mentioned his firm was contemplating whether or not to increase in San Francisco. On the time, it was unclear whether or not folks would return to places of work after the pandemic, and a few companies raised considerations about security and cleanliness of San Francisco’s streets. Wendell mentioned his firm determined to take a position extra within the metropolis after getting reassurances from metropolis leaders.
“Persons are seeing an administration that’s centered on public security, clear streets and creating the circumstances that additionally says that we’re open for enterprise,” mentioned Lurie, who defeated incumbent mayor London Breed final November by campaigning on public security. “We’ve mentioned from day one, we’ve got to create the circumstances for our arts and tradition, for our small companies and for our innovators and our entrepreneurs to thrive right here.”
Laurel Arvanitidis, director of enterprise growth for San Francisco’s Workplace of Financial and Workforce Growth, mentioned that the town’s coverage and tax reforms have helped entice and retain companies in recent times, together with an workplace tax credit score that offers as much as a $1-million credit score for companies which are new or relocating to San Francisco.
On Thursday, Lurie introduced on social media that cryptocurrency trade Coinbase is opening an workplace in San Francisco after leaving the town 4 years in the past.
“We’re excited to reopen an workplace in SF,” Coinbase Chief Government Brian Armstrong wrote in response to the mayor’s social media submit. “Nonetheless numerous work to do to enhance the town (it was so badly run for a few years) however your glorious work has not gone unnoticed, and we vastly recognize it.”
Santa Clara-based Nvidia can also be in search of San Francisco workplace area, in response to an individual conversant in the matter who declined to be named. The information was first reported by the San Francisco Chronicle. Nvidia, which additionally has California places of work in San Dimas and Sunnyvale, declined to remark.
“It’s due to AI that San Francisco is again,” Nvidia Chief Government Jensen Huang mentioned final month on the Hill & Valley Discussion board podcast. “Nearly everyone evacuated San Francisco. Now it’s thriving once more.”
However San Francisco nonetheless has challenges forward, as corporations proceed to push staff to return to the workplace. Whereas the road surroundings has improved, it will likely be vital for the town to maintain up the progress.
Lurie mentioned his administration inherited the most important finances deficit within the metropolis’s historical past they usually need to get that underneath management. His administration’s job is to ensure streets and public areas are clear, protected and alluring, he mentioned.
“Now we have work to do, there’s no query, however we’re a metropolis on the rise, that’s for certain,” Lurie mentioned.
Occasions employees author Roger Vincent contributed to this report.
