“Smaller and midsized tenants that moved out of San Francisco due to high rents, early-stage growth companies, or companies looking to upgrade their space, now have the opportunity secure the lowest rents within the past 10 years. Many landlords are providing outsized concessions to achieve longer term leases.  On the bright side, the flight to quality continues and the best buildings are maintaining high occupancy and strong rents,” said Ross Robinson, Principal and Market Leader for Avison Young’s San Francisco office.

When asked when San Francisco will return to an office vacancy rate of 12%, the overwhelming majority (56%) said it would be by 2029. Nevertheless, they observed that the current high vacancy rate, which is hovering around 38% presents a distinctive opportunity for tenants aiming to establish a presence in one of the world’s most prominent markets.

The majority of Avison Young respondents expect concession packages to be significantly higher in 2024 as landlords compete with limited activity. However, they also see touring activity moving slightly higher next year which will also drive an uptick in leasing velocity.

Some other trends identified in the survey include:

• Office Amenities are in and Coworking is Out
• Return to Office is Trending
• The Pace of Layoffs is Decreasing
• The AI Industry is the Top Bay Area Market Driver