Some San Francisco tech companies are taking more office space than they actually need in an effort to cash in on the current down commercial market and allow room for growth, according to commercial agents and analysts. The increased pressure on Class A has led San Francisco to see the highest year-over-year increase in Class B leasing activity in the nation this spring.
“We’re seeing well-capitalized tech firms, especially those with recent funding or strong balance sheets, taking advantage of San Francisco’s tenant-favorable leasing environment to secure high-quality office space at discounted rates — even if they don’t have immediate occupancy plans,” said Colliers’ Anthony Shell.
One prime example is Databricks’ lease of 150,000 square feet at One Sansome, he said, where the artificial intelligence-powered data and analytics company is positioning itself for long-term growth despite its hybrid work policies and a head count that does not currently require such a large footprint.
“Deals like this reflect a broader strategy among mature tech firms: locking in today’s favorable economics — often with extended free rent, turnkey buildouts, and flexibility — as a hedge against future market tightening,” he said.
The tech companies that are taking more space than they currently need have both “bullish growth projections” and “dry powder” from investors, said Avison Young agent William O’Daly. Databricks, for instance, announced in December it had raised $8.6 billion of a $10 billion Series J round, valuing the company at $62 billion.
Right now, the supersizing trend is the exception rather than the rule, commercial experts said, with most tech companies still interested in flexibility and short-term leases, which landlords could benefit from as well if the market does indeed pick up steam.
“A lot of owners and investors are cognizant that AI companies and new-gen tech companies are signing short-term deals because they expect to grow substantially in two to three years and employees are increasingly coming back to the office,” said Louis Thibault, who heads research for the western region at Avison Young. “Many of these landlords must feel that if they can hold on to their buildings — if it has good value proposition — then they would be able to find tenants by the end of 2026.”
Even the fast-growing tech companies that are leasing extra space are “doing so more conservatively” than they have in the past, said Colin Yasukochi, the San Francisco-based head of research at CBRE, given that there are still plenty of vacant offices.
During the mobile app era from 2008 to 2019, for example, tech firms leased up big blocks of space and warehoused or subleased the space to other firms for a few years until they needed it because there was single-digit vacancy at the time, not the 35 percent availability the city is seeing today, Yasukochi said.
But as the market tightens, expansions could become “more aggressive” as “high-quality options continue to diminish in the best locations, even though overall vacancy will remain high,” he said. He believes big tech firms are more motivated by a desire to grow without moving than they are in locking in discounted rents.
There are some signs that smaller, more bottom-line oriented tech firms are pushing a resurgence in interest in Class B properties, according to Avison Young data. Twelve-month trailing figures through May 2025 show San Francisco with the highest year-over-year increase in Class B leasing activity in the country. While Class B activity in the city over the last year is still 36 percent lower than it was before the pandemic, it is up 34 percent compared to the year before, , while the nationwide figure has dropped 8 percent, year over year.
A-plus amenities and prime locations that offer safety, easily accessible transit and spruced up surroundings are still driving a lot of leasing decisions, agents said. But as larger, more established tech companies eat up the A spaces, smaller start-ups are increasingly on the hunt for savings.
“We have seen a remarkable increase in new gen and AI companies leasing Class B space due to the lower cost basis and flexible terms,” Thibault said.
In San Francisco, nearly 10 percent of offices are considered “trophy,” over 50 percent are considered Class A, and about a third are considered Class B, according to Avison Young. Under 4 percent are considered Class C.
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