After years of sluggish activity and stubbornly high vacancies, San Francisco’s commercial real estate sector is beginning to show signs of revival, and the driving force is artificial intelligence. A surge of demand from AI companies is breathing new life into the downtown core, drawing interest from both developers and investors who had largely written off the market in recent years.
Firms such as OpenAI, Anthropic, Scale AI, Databricks, and Harvey have all made significant commitments to office space in the city, signaling that San Francisco may once again be on the cusp of a broader technology-led rebound. OpenAI, in particular, has emerged as one of the city’s largest office tenants, now occupying close to one million square feet of space with plans to expand further. Other AI startups, many of them flush with venture capital funding, have joined the leasing rush, collectively taking up around one million square feet in 2025 alone. Industry analysts predict that AI companies could occupy between 12 and 15 million square feet of office space in San Francisco by 2030, a level that would transform the city’s downtown economy and potentially restore its place as the center of the West Coast technology industry.
Despite this encouraging momentum, challenges remain. Vacancy rates across the downtown office market still hover around 22.8 percent, more than triple the levels seen before the pandemic disrupted normal work patterns and forced a shift toward remote employment. Many of the city’s older office towers remain half empty, and landlords have been compelled to offer generous incentives to attract tenants, including months of free rent and substantial allowances for renovations. Brokers caution that while AI firms are leasing significant amounts of space, their employment bases are smaller and less office-centric than those of past technology booms, raising questions about whether the city will ever return to the packed office corridors of a decade ago.
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Still, optimism is growing among both real estate developers and city leaders. Houston-based developer Hines has put forward an ambitious proposal for a new 1,225-foot office tower on the former Pacific Gas & Electric site at 77 Beale Street. If approved, the skyscraper would surpass Salesforce Tower as the tallest building on the West Coast, reshaping the San Francisco skyline and providing more than 1.6 million square feet of modern office space. The project would also include retail and restaurant space, a public garden, and restoration of nearby historic buildings, along with the creation of 120 new housing units. City officials, including Mayor Daniel Lurie, have praised the proposal as a bold step toward reinvigorating the city’s core and restoring investor confidence.
Investment firms are also signaling their belief in a turnaround by snapping up properties at steep discounts. Blackstone recently acquired a 25-story office tower for roughly one-third of its 2019 valuation, while a partnership involving DRA Advisors purchased Market Center at a discount of more than 70 percent from its previous sale price. These investors intend to reposition aging office buildings with modern amenities designed to appeal to younger tenants, such as fitness facilities, shared workspaces, and wellness-centered design features.
The AI boom is also having spillover effects across the city’s broader economy. Venture capital firms have poured more than $70 billion into AI-related companies in the first half of 2025, tripling the pace of funding compared with the year before. The influx of capital is creating demand for restaurants, retail stores, and housing in nearby neighborhoods. Realtors are already reporting an uptick in interest from both renters and homebuyers who are relocating to San Francisco to work in the AI sector. This demand is beginning to push up residential rents, which had softened in recent years, and is restoring vitality to districts that had struggled with declining foot traffic and empty storefronts.
For real estate professionals, the changes underway in San Francisco present new opportunities. As office towers are repopulated by AI firms and their employees, the surrounding residential market is expected to experience a corresponding increase in demand. Realtors who specialize in relocations, luxury sales, and multifamily properties may find new prospects among the thousands of highly paid workers moving into the city. The shift in tenant preferences for modern, amenity-rich office spaces may also influence residential markets, as buyers and renters increasingly seek homes with advanced technology features, flexible layouts, and wellness-oriented amenities.
The signs of resurgence in San Francisco’s downtown are not only economic but also symbolic. For years, the city was viewed as a cautionary tale of urban decline, beset by high vacancy rates, rising crime, and worsening homelessness. Now, with major corporations recommitting to the city and developers pushing forward with bold new projects, a sense of optimism is slowly returning. Business leaders and civic officials alike are framing the AI-driven office revival as a turning point, one that could redefine San Francisco’s future and reestablish its position as a hub of innovation, investment, and urban vitality.
While it will take time for the momentum to translate into a fully balanced market, the revival sparked by artificial intelligence is a reminder of San Francisco’s enduring ability to reinvent itself. The combination of substantial leasing activity, unprecedented development proposals, and renewed investor confidence suggests that the city may yet overcome its recent struggles and emerge stronger than before.
