San Francisco leads the nation in office demand, according to a real estate survey. But tell that to office landlords, whose soaring vacancy has barely budged.
The city saw a 32 percent spike in office demand between March of last year and last month, the San Francisco Business Times reported, citing a report from real estate technology platform VTS.
The VTS Office Demand Index Report was based on office tours by potential office tenants, based on tenant requirements, according to the VTS website.
The surge in interest could stem from a belated shift in return-to-office policies and a cooling job market that draws more employees back to in-person work, according to the firm.
“At first glance, a cooling labor market might seem like bad news for the health of the office sector — but the opposite could be true,” Nick Romito, CEO of VTS, told the Business Times. “In recent years, hiring surged, but employers had limited leverage to bring employees back to the office.
“Now, as jobs become harder to come by, employers are in a stronger position to require in-office attendance with less resistance.”
What the “office demand” cited by VTS doesn’t measure is the record number of empty offices that have plagued San Francisco since the pandemic.
During the 12-month VTS study period that ended last month, office vacancy in San Francisco fell — to 35.8 percent in the first quarter from 36.6 percent in the first three months of 2024, according to CBRE.
So while office tours may suggest a 32 percent spike in office demand, overall office occupancy in San Francisco grew by less than 1 percent. The demand didn’t translate into deals.
VTS research found that other tech-heavy, remote-friendly markets like Boston, Seattle and Washington, D.C., also had higher office demand based on tenant tours, with a year-over-year increase of about 20 percent.
That’s likely due to weakening technology, advertising, media and information labor markets, and more workers returning on-site due to increased employer pressure, according to the report.
Across the U.S., office demand fell last quarter in most other markets, including Los Angeles, Chicago and New York — the first decline in demand in 20 months. VTS blamed the shift on the uncertainty around tariffs and U.S. trade policy, with fewer job postings and slower hiring.
Prospective tenants in San Francisco are also looking for bigger offices, with return-to-office orders increasing workplace visits, according to the Business Times.
A fifth of prospective tenants looking for offices wanted to grow or expand their footprint in the city, the highest level of new growth since the pandemic, according to CBRE.
— Dana Bartholomew
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