It’s no mystery that the high-rent, tech-centric Silicon Valley office sector took a major hit with the pandemic and the rise of remote work. The San Francisco Bay Area was especially impacted, but the city and region are eyeing a gradual turnaround.
Overall office requirements jumped to 6.3 million square feet in San Francisco during the first quarter of 2024, rising from 4.2 million in the fourth quarter of 2023. Tenant requirements are approaching levels not seen since the pre-pandemic peak, when they reached 6.8 million square feet.
While not the sole driver of this trend, the growing footprint of Artificial intelligence (AI) has spawned cautious optimism in Silicon Valley CRE. Whether launching, incubating, or expanding, AI firms throughout the Bay Area represent the highest concentration of startups and tech talent globally. According to JLL, 37% of AI companies are based in the United States, and 42% are located in the Bay Area.
In 2023, AI firms accounted for 1.3 million square feet of office space in San Francisco. Generative AI leaders Anthropic and OpenAI took up the largest blocks, with smaller companies following suit. In 2024, AI companies look to add another 800,000 square feet.
AI companies have leased more than 1.7 million square feet of office space since ChatGPT launched in late 2022. After leaving a smaller property in the Mission Bay area, OpenAI now occupies 500,000 square feet within two buildings at Uber’s headquarters. It was the largest commercial office lease deal since 2018. Additionally, Hive AI more than doubled its previous 20,000-square-foot office space, leasing 57,117 square feet of space in the South Financial District in San Francisco for its new headquarters.
Global funding for AI firms was projected to jump 45% to more than $115 billion by the end of 2024 as investors seek out the next ChatGPT. The U.S. has consistently led in this area, accounting for 60% of all global AI investment in the past decade. This can be seen in San Jose, where there is growth. In January 2025, Astera Labs, a connectivity solutions company for AI and cloud infrastructure, plans to lease an additional 154,200 square feet to support its headquarters in north San Jose.
Successful AI startups, such as Notion Labs, tend to outgrow their footprint at a rapid pace. In 2021, the AI productivity company moved into a 65,000-square-foot space but already needed to expand, so it recently signed a lease for 105,000 square feet in San Francisco’s Financial District. Uber listed it for sublease in 2019, but it’s mostly been empty until Notion Labs moved in.
The AI areas with the most dollars flowing to them are medical and healthcare, data management, processing and cloud computing, and fintech. The market is expected to grow to $98.1 billion by 2026. Venture capital investment in AI in the U.S. alone hit $52.7 billion. Between 2014 and 2023, the cumulative venture capital funding for AI was $234.1 billion.
While JLL predicts that by 2030 AI companies will be leasing 12.7 million square feet of space in San Francisco, or almost 15% of the city’s current office space, the AI boom isn’t likely to solve the Bay Area’s office-market deficit anytime soon. Still, there’s cautious optimism that the upward trend will remain steady. Silicon Valley still has a large vacancy hole to fill, and it remains to be seen if AI can do it alone.
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