AI Industry Growth Predicted to Boost San Francisco’s Office Space Demand
A new analysis from real estate firm CBRE suggests that the current AI boom could be the key to revitalizing San Francisco’s struggling downtown business district. The report compares the office space growth of three major tech booms over the past few decades, predicting that the AI industry will occupy more space than the dot-com era but less than the app economy era.
Over the past five years, AI companies have leased over 5 million square feet of office space in San Francisco, with projections indicating an additional 16 million square feet by 2030. To put this into perspective, during the six-year dot-com era starting in 1995, office space grew to 11 million square feet, reducing vacancy rates from 10% to 1%. The mobile app era saw even more significant growth, with 31 million square feet of office space being occupied, lowering vacancy rates from 16% to 4%.
CBRE used venture capital funding as a predictor of market growth, noting its strong correlation with employment and office space expansion. AI companies have received over $100 billion in VC funding, surpassing the combined total of the previous two tech eras. “Artificial intelligence is just really getting started,” said Colin Yasukochi, executive director of CBRE’s tech insight center. “We’ve seen significant growth over the last two years, and much more is expected.”
Despite these positive projections, San Francisco’s current office vacancy rate remains at a historic high of over 35%. Even if the predictions hold true, the city would still be far from the single-digit vacancy rates seen during the peak of previous tech booms. The AI industry’s growth is expected to continue, with new companies emerging regularly and existing ones expanding their workforce.
While the analysis offers a promising outlook for San Francisco’s office market, it remains to be seen how the AI boom will ultimately impact the city’s downtown area. The continued growth of AI companies could potentially bring much-needed vitality to the currently struggling business district.
