San Francisco Commercial Office Space for Rent
Q4 2025
San Francisco Commercial Real Estate Market Report
Q4 2025
Market Overview: San Francisco CRE Market (Q4 2025)
The San Francisco commercial real estate market is currently defined by a dramatic bifurcation, where the city's historical strengths in technology are driving both deep challenges and pockets of intense recovery [3, 1]. While the Office sector continues to grapple with a historically high vacancy rate and structural shifts from remote work, it is simultaneously seeing a massive flight-to-quality, with the newest and best assets commanding premiums and attracting capital [3, 2]. This recovery is almost singularly focused on the Artificial Intelligence (AI) sector, which is expanding rapidly and demanding high-spec space [3]. The Industrial and Retail sectors remain tightly constrained by high costs and limited new supply, with Retail showing promising tightening of overall vacancy despite concentrated distress in the downtown core [6, 4]. Investment activity is highly selective, favoring stabilized, high-quality assets and emerging opportunities in the AI-driven data center market [3, 13].
Metric Office Industrial Retail Coworking
Vacancy Rate ~30.3% - 31.1% [2, 3] 11.5% [4] 6.8% [6] N/A
Average Asking Rent (FS) ~$47.95 - $68.29 per SF [3, 2] ~$34.00 per SF [4] ~$33.65 per SF [6] $230–$235/Month [9]
New Construction (SF) ~2.0 Million [3] Limited / N/A [4] 17,000 SF [6] N/A
Key Takeaways 📈
The San Francisco market is undergoing a bifurcated recovery fueled almost exclusively by the Artificial Intelligence (AI) sector [3]. While the Office sector still contends with a historically high vacancy rate (above 30%), it is showing signs of stabilization with positive net absorption in Q3 2025 and a significant decline in sublease space to 6.0 million square feet [3]. Investment sales volume nearly doubled year-over-year, indicating a return of investor confidence focused squarely on trophy, best-in-class assets [3]. The Industrial and Retail sectors are grappling with high costs and regulatory hurdles, but Retail vacancy is tightening despite ongoing challenges in the downtown core [6, 4]. Overall, the market's recovery is cautious and hyper-selective, driven by the high-growth, high-demand AI economy [3, 1].
TenantBase Data Insights: San Francisco Q4 2025
TenantBase data for the last 90 days indicates a heavy emphasis on Retail/Storefront space and a preference for very short-term Office deals [14].
- Dominant Search Type: Retail/Storefront searches accounted for 55% of all deals, significantly outpacing Office (26%) and Warehouse (18%) [14].
- Overall Term Preference: The most common lease term searched was Less than one year (37% of all deals), followed by 2-3 Years (19%) and 5+ Years (19%) [14].
Office Space Analysis
The San Francisco office market remains challenged by remote work and tech industry contraction, yet key metrics show the beginning of a stabilization phase [1]. The overall availability rate decreased by 90 basis points in the second quarter to 35.2%, and the vacancy rate decreased 20 basis points to 30.3% [2].
Metric SF Performance (Q3 2025) Trend
Overall Vacancy Rate ~30.3% - 31.1% [2, 3] High, but decreasing QOQ [3]
Average Asking Rent (FS) ~$47.95 - $68.29 per SF [3, 2] Edging up (ended 13 consecutive quarters of falling rents) [2]
Sublease Space 6.0 Million SF [3] Declined 25% YOY [3]
Tenant Search Deals (Last 90 days) 30 Deals (26% of total) [14] Proprietary Data [14]
Deep Dive: Flight to Quality and Tenant Demand Profile
The most active segment is the trophy, Class A sector, driven by AI tenants, which is leading to slightly increasing average asking rents [3]. Net absorption turned positive in Q3 2025 (60,796 SF) for the first time in several quarters, reversing prior losses [3]. Sublease availability, a major market headwind, declined to its lowest level since early 2020 [3].
TenantBase data shows a preference for ultra-short-term deals in the office sector [14]:
- Less than one year: 53% of office deals [14].
- 2-3 Years: 23% of office deals [14].
- 5+ Years: 10% of office deals [14].
The average office search size shows a substantial increase in size for longer commitments [14]:
- The overall average office search size is between 2,300 SF (lower bound) and 4,700 SF (upper bound) [14].
- The average size requirement for tenants seeking 5+ year leases is significantly larger, averaging 7,500 SF (lower bound) to 15,000 SF (upper bound) [14].
Warehouse/Industrial Space Analysis
The San Francisco industrial sector is characterized by limited supply due to high land costs and a tight development pipeline [4]. Demand remains strong for well-located facilities from tech-adjacent and university users [4].
Metric SF Performance (Q3 2025) Trend
Overall Vacancy Rate 11.5% [4] Tightening (limited new supply) [4]
Average Asking Rent (Gross) ~$34.00 per SF [4] Steady/High [4]
Net Absorption (YTD) N/A Steady Leasing from Tech-Adjacent Users [4]
Tenant Search Deals (Last 90 days) 21 Deals (18% of total) [14] Proprietary Data [14]
Deep Dive: Balanced Conditions and Tenant Profile
The market's high median asking rents reflect the limited supply [4]. The region's rent growth has moderated and even declined in the West region (-3.0% YOY), reflecting a national trend of moderation after a prolonged boom [5].
Internal data reveals that the most common lease term requests for Industrial/Warehouse space were 2-3 Years (36% of industrial deals), 3-5 Years (27% of industrial deals), and 5+ Years (18% of industrial deals) [14].
The average search size for industrial space is between 5,750 SF (lower bound) and 8,950 SF (upper bound) [14].
Retail Space Analysis
The San Francisco retail sector has seen its citywide vacancy decline to 6.8%, down 70 basis points year-over-year [6]. However, concentrated vacancies remain an issue in downtown cores like Union Square (22%) and Van Ness (53%) due to hybrid work and local policies [7].
Metric SF Performance (Q3 2025) Trend
Overall Vacancy Rate 6.8% [6] Tightening (Down 70 bps YOY) [6]
Average Asking Rent ~$33.65 per SF (Gross) [6] Strong Annual Growth (5.42% increase YOY) [6]
Net Absorption (YTD) -72,289 SF (Negative) [6] Muted but positive
Tenant Search Deals (Last 90 days) 63 Deals (55% of total) [14] Proprietary Data [14]
Deep Dive: Landlord Pricing Power and Tenant Behavior
The decline in citywide vacancy is a positive sign, but the most severe challenges persist in office-adjacent, high-street locations [7, 8]. Construction activity has plummeted to just 17,000 SF, indicating an extreme supply constraint [6].
TenantBase search volume indicates that Retail/Storefront searches are the dominant volume [14], making up 55% of all tenant searches [14]. The most requested terms were 5+ Years (34% of retail deals), 1-2 Years (21% of retail deals), and 3-5 Years (21% of retail deals) [14]. The high volume suggests intense, localized competition for neighborhood and suburban space [14]. The average search size for retail space is between 3,900 SF (lower bound) and 6,791.67 SF (upper bound) [14].
Coworking and Flexible Space Analysis
San Francisco remains a premium, established market for flexible workspace [9]. The market has transitioned from aggressive expansion to stability and refinement, focusing on larger, high-end, and multifunctional spaces that cater to enterprise-level hybrid demand [9, 10].
Metric SF Performance (Q3 2025) Trend
Average Space Size ~25,180 SF per location [9] Preference for large, multifunctional spaces [9]
Median Monthly Rate $230–$235 per month [9] Premium pricing cluster [9]
Total Locations N/A Anchors the West Coast Coworking Base [9]
Deep Dive: Rationalization
Operators are prioritizing operational efficiency and design aesthetics over pure scale [9]. The average space size in San Francisco clusters near 20,000 to 22,000 square feet, reflecting the strong demand for large, dedicated spaces for hybrid enterprise tenants [9]. Technology integration, high-quality HVAC systems, and flexible layouts are now non-negotiable staples for tenants [10].
Internal TenantBase search data for Coworking space showed "No deals to show" for the standard lease term breakdown in the last 90 days [14], suggesting Coworking tenants are using the platform primarily for flexible memberships or very short-term agreements that fall outside the standard deal classifications [14]. The top location interest by number of deals was "sf" (14 deals), followed by composite entries including "daly city, dogpatch, financial district..." (12 deals) and "south san francisco" (9 deals) [14].
Emerging Sector Deep Dive: Data Centers
The Data Center market is defined by record-low vacancy and insatiable demand driven by Artificial Intelligence (AI) workloads [13, 11]. While San Francisco/Bay Area is a major technology hub, its growth is being constrained by high land costs and utility power availability [12].
- AI Workloads: AI is fundamentally redefining data center requirements, with new deployments exceeding 125 kW per rack [13].
- Infrastructure Shift: New construction and retrofits are increasingly adopting liquid cooling (Direct-to-Chip and Rear Door Heat Exchangers) to support high-density, AI-optimized builds [13, 11].
- Power Constraints: The demand surge is straining traditional power grids, leading developers to shift site selection criteria based on available power capacity and to explore behind-the-meter solutions [12, 11].
- Investment: The sector continues to attract significant new capital due to limited supply and rising rents, with investment focused on development financing [13].
Sources
No. Source Date URL
1 2025 Mid-Year Office Market Report: Part Four - CompStak October 2025 https://compstak.com/blog/2025-mid-year-office-market-report-part-four
2 San Francisco Real Estate Market Reports - Newmark Q2 2025 https://www.nmrk.com/insights/market-report/san-francisco-market-reports
3 San Francisco Office Market Report - Kidder Mathews Q3 2025 https://kidder.com/market-reports/san-francisco-office-market-report/
4 San Francisco Commercial Real Estate Market Updates - Crexi September 2025 https://www.crexi.com/blog/san-francisco-commercial-real-estate-market
5 U.S. Industrial MarketBeat Report - Cushman & Wakefield Q3 2025 https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats/us-industrial-marketbeat
6 San Francisco Retail Market Report - Kidder Mathews Q3 2025 https://kidder.com/market-reports/san-francisco-retail-market-report/
7 San Francisco's retail vacancy problem - GrowSF.org July 2025 https://growsf.org/research/2025-07-14-retail-vacancy/
8 2025 Retail Rent Dynamics - CBRE May 2025 https://www.cbre.com/insights/reports/2025-retail-rent-dynamics
9 U.S. Coworking Industry Report Q3 2025 - CoworkingCafe October 2025 https://www.coworkingcafe.com/blog/national-coworking-report/
10 How San Francisco's Office Space Market is Adapting... - Mindspace Q4 2024 https://www.mindspace.me/blog/post-pandemic-work-trends-san-francisco/
11 2025 Global Data Center Outlook - JLL 2025 https://www.jll.com/en-us/insights/market-outlook/data-center-outlook
12 Americas Data Center Update - Cushman & Wakefield 2025 https://www.cushmanwakefield.com/en/insights/americas-data-center-update
13 North America Data Center Report Midyear 2025 - JLL Midyear 2025 https://www.jll.com/en-us/insights/market-dynamics/north-america-data-centers
14 TenantBase (Internal Data - Tenant Searches) - Proprietary Data Last 90 Days (Proprietary Data)
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Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.