San Francisco Commercial Office Space for Rent

Q3 2026

Q3 2026 San Francisco Commercial Real Estate Market Report

Focus: Q3 2026 Market Trends

Executive Summary

San Francisco's office recovery accelerated in 2026, powered by AI companies, with total office vacancy falling 440 basis points year over year and year-to-date absorption turning sharply positive. Tenant demand on TenantBase reflects the same shift: office space accounted for 63.6% of all San Francisco tenant searches in Q3, up from 38.7% in Q2 and 30.0% in Q1, and office tenants are committing to longer terms.

Sector Snapshot

  • Office: Recovering. Total vacancy fell to 27.2% in Q2 on 829,597 SF of positive absorption, led by AI tenants.
  • Industrial: Stable. Vacancy was 8.1% with modest positive absorption.
  • Retail: Rents rising. Vacancy was 6.6% in Q3 while asking rents rose 9.66% year over year.
  • Multifamily: Very tight. Vacancy was 2.4% with double-digit rent growth.

San Francisco Tenant Demand Index

The TenantBase Tenant Demand Index tracks what businesses in San Francisco and the northern Peninsula are actively searching for on the TenantBase platform each quarter. Because it measures tenant intent before leases are signed, it shows where demand is heading ahead of traditional vacancy and absorption data.

Q3 2026 Search Share by Space Type (July 1 to September 30, 2026)

  • Office: 63.6%
  • Retail/Storefront: 30.9%
  • Warehouse/Industrial: 5.5%

Three-Quarter Trend

  • Office: 30.0% in Q1, 38.7% in Q2, 63.6% in Q3
  • Retail/Storefront: 45.5% in Q1, 41.9% in Q2, 30.9% in Q3
  • Warehouse/Industrial: 24.6% in Q1, 22.6% in Q2, 5.5% in Q3

Key Takeaways

  • Office demand has risen every quarter of 2026, from 30.0% to 63.6% of San Francisco searches, mirroring the city's AI-led office recovery.
  • Office tenants are committing longer. 2 to 3 year office terms became the top choice at 44.1% in Q3, up from 26.2% in Q2, while terms under one year fell from 50.0% to 38.2%.
  • Office space needs scale with commitment. Tenants seeking 2 to 3 year terms averaged 3,429 to 7,036 SF, more than three times the 1,000 to 2,100 SF sought for terms under one year.
  • South San Francisco led location interest, ahead of the Financial District, Daly City, Jackson Square, and the Mission District.

Office Market

San Francisco office posted its strongest half-year of absorption in years through Q2 2026, the most recent quarter with published citywide data, with AI companies driving leasing.

Key Metrics (Q2 2026)

  • Total vacancy: 27.2%, down 440 basis points year over year, with direct vacancy at 24.7% (Kidder Mathews)
  • Year-to-date net absorption: positive 1,684,451 SF, versus negative 614,137 SF a year earlier (Kidder Mathews)
  • Year-to-date leasing: 6,989,463 SF, up 23.0% year over year (Kidder Mathews)
  • Average direct asking rent: $49.10/SF per year full service, up 4.2% year over year (Kidder Mathews)
  • Tightest submarket: Mission Bay/China Basin at 8.5% direct vacancy (Kidder Mathews)
  • Notable AI leases: together.ai (149,000 SF), LangChain (70,000 SF), Harvey AI (62,000 SF), and Assort Health (62,000 SF) (Kidder Mathews)

TenantBase Office Activity

Demand share: 63.6% of San Francisco tenant searches, up from 38.7% in Q2 and 30.0% in Q1.

Lease term preferences:

  • 2 to 3 years: 44.1%
  • Less than one year: 38.2%
  • 5+ years: 11.8%
  • 3 to 5 years: 5.9%

Space requirements by term:

  • Less than one year: 1,000 to 2,100 SF
  • 2 to 3 years: 3,429 to 7,036 SF
  • 3 to 5 years: 5,000 to 10,000 SF

Top locations: South San Francisco was the most requested single area across all space types in Q3, followed by the Financial District, Daly City, Jackson Square, and the Mission District. Many tenants searched broadly across Dogpatch, the Financial District, Jackson Square, and Mid-Market.

TenantBase data vs. the market: The rise in office demand on TenantBase matches the city's AI-driven recovery, but the two markets look different. Large AI tenants are absorbing Class A space, while TenantBase searchers are mostly small and mid-size firms needing 1,000 to 7,000 SF. With SOMA at 32.0% direct vacancy and the Financial District at 27.5%, these tenants still have significant leverage outside Mission Bay, where vacancy is just 8.5%.

Industrial & Warehouse Market

Key Metrics (Q2 2026)

  • Vacancy: 8.1% (CBRE)
  • Net absorption: positive 33,309 SF (CBRE)
  • Average asking rent: $1.89/SF per month industrial gross (CBRE)

TenantBase Industrial Activity

Demand share: 5.5% of San Francisco tenant searches, down from 22.6% in Q2 and 24.6% in Q1. Industrial searches in Q3 averaged 2,500 to 10,000 SF.

Retail Market

Key Metrics (Q3 2026)

  • Vacancy: 6.6%, down 10 basis points year over year (Kidder Mathews)
  • Average asking rent: $36.56/SF per year, up 9.66% year over year (Kidder Mathews)
  • New supply: no deliveries year to date, with 7,200 SF under construction (Kidder Mathews)
  • Largest sale: 146 Geary St in Union Square, 12,961 SF, for $20.5 million (Kidder Mathews)

TenantBase Retail Activity

Demand share: 30.9% of San Francisco tenant searches, down from 41.9% in Q2 and 45.5% in Q1.

Lease term preferences:

  • 2 to 3 years: 40.0%
  • Less than one year: 20.0%
  • 3 to 5 years: 20.0%
  • 5+ years: 20.0%

Space requirements: Retail tenants averaged 1,000 to 2,500 SF for 2 to 5 year terms and 1,500 to 3,000 SF for 5+ year terms.

TenantBase data vs. the market: San Francisco retail tenants on TenantBase are small-format users, most needing under 3,000 SF on 2 to 3 year terms. With asking rents up nearly 10% year over year and no new supply delivering, tenants should lock in terms early, while Union Square and other areas with higher availability offer the most room to negotiate.

Multifamily Market

San Francisco apartment vacancy was 2.4% in Q2 2026, with SoMa at 2.0% and West San Francisco at 1.8%, according to CBRE. Rents on the SF/Peninsula grew 11.4% year over year.

Q4 2026 Outlook

  • Office: Expect continued recovery led by AI tenants, with rising small and mid-size demand from TenantBase searches supporting leasing beyond Class A towers.
  • Industrial: Expect stable vacancy near 8%.
  • Retail: Expect rents to keep rising with almost no new supply.
  • Multifamily: Expect very low vacancy and continued rent growth.

Frequently Asked Questions

What type of commercial space are San Francisco tenants searching for in 2026?

In Q3 2026, office space made up 63.6% of San Francisco tenant searches on TenantBase, followed by retail/storefront at 30.9% and warehouse/industrial at 5.5%. Office share has risen every quarter of 2026.

What lease terms do San Francisco office tenants want?

In Q3 2026, 44.1% of San Francisco office tenants on TenantBase sought 2 to 3 year terms and 38.2% sought terms under one year.

Which San Francisco areas are tenants searching most?

South San Francisco was the most requested area on TenantBase in Q3 2026, followed by the Financial District, Daly City, Jackson Square, and the Mission District.

What is the office vacancy rate in San Francisco?

San Francisco total office vacancy was 27.2% in Q2 2026, down 440 basis points year over year, with direct vacancy at 24.7%, according to Kidder Mathews.

Is AI driving San Francisco office demand?

Yes. Kidder Mathews identifies AI as the primary driver of San Francisco office demand in 2026, with recent leases from together.ai, LangChain, Harvey AI, and Assort Health.

How can I find commercial space in San Francisco at no cost?

TenantBase matches business tenants with vetted independent tenant rep brokers in San Francisco and the Peninsula at no cost to the tenant. Brokers are compensated by the landlord. Get started with TenantBase.

Sources

  1. TenantBase proprietary search data, San Francisco, July 1 to September 30, 2026
  2. TenantBase, San Francisco Commercial Real Estate Market Report, Q2 2026
  3. TenantBase, San Francisco Commercial Real Estate Market Report, Q1 2026
  4. Kidder Mathews, San Francisco Office Market Report, Q2 2026
  5. CBRE, San Francisco Industrial Figures, Q2 2026
  6. Kidder Mathews, San Francisco Retail Market Report, Q3 2026
  7. CBRE, Bay Area Multifamily Figures, Q2 2026

Disclaimer

Information in this report is aggregated from third-party sources and TenantBase proprietary platform data, and was synthesized with the assistance of AI. Market metrics reflect the most recent published data available at the time of writing. TenantBase search data reflects tenant activity on the TenantBase platform and is not a measure of total market leasing. All figures should be independently verified before making real estate decisions.