Artificial intelligence companies hunt for San Francisco offices
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HIVE, an artificial intelligence (AI) company, is subleasing three floors of a downtown San Francisco office, a sign of life in a market beleaguered by soaring vacancies after some major technology companies pulled back.
The AI firm plans to occupy about 57,000 square feet (5,300 square metres) at 100 First Street, taking over space in the 27-storey tower that software company Okta leased in 2017, according to Alexander Quinn, lead Northern California researcher for Jones Lang LaSalle. Okta previously reported plans to scale back its real estate footprint.
More than 10 AI companies, including Hive, are in the market for 800,000 square feet of San Francisco offices, Quinn said.
“Big AI are pursuing space,” Quinn said in an interview. “Their thinking is, ‘We’re better together in the office, especially as a startup’.”
San Francisco is home to some of the most prominent AI firms, including ChatGPT developer OpenAI, which has raised more than US$10 billion and embarked on a hiring spree. Quinn declined to name other AI firms seeking office space because of client confidentiality agreements.
The city’s office vacancy rate climbed to nearly 32 per cent in the second quarter, according to preliminary figures from CBRE Group. About 1.9 million square feet of additional space became available in the period as tenants continued to cut back. In 2019, before the pandemic, CBRE reported San Francisco’s vacancy rate was less than 4 per cent.
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San Francisco-based tech companies including Dropbox, Salesforce, Twitter and Uber Technologies are among the large technology companies that have put space across the country on the sublease market. Office utilisation on an average weekday is less than half of its pre-pandemic levels in San Francisco as employees in the tech-heavy city continue to work remotely, according to Kastle Systems.
The absence of daytime workers, as well as concerns about safety and homelessness, has rippled beyond the office sector, hitting the city’s tax base as property values fall. The owner of two large hotels in the city stopped making loan payments on the properties and said it expects it’ll eventually remove those assets from its portfolio. Investors behind a major shopping mall walked away from the property in June.
Representatives of Okta and CBRE, which manages leasing for 100 First, declined to comment. Spokespeople for Hive and Kilroy Realty, the owner of 100 First, didn’t reply to requests for comment.
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