Office Investment Surges in San Francisco Amid AI Boom

AI-driven leasing fuels San Francisco’s office rebound as investors target trophy towers, conversions, and high-end commercial assets.

February 27, 2026

Nina Dale

Office investment in San Francisco is rebounding, fueled by the city’s AI expansion and renewed tenant demand.
Developers are launching new trophy towers and major redevelopments, targeting both office and mixed-use projects.
Leasing activity in San Francisco outpaces other US markets, with over 1 MSF signed in Q4 2025, the highest since 2018.
City incentives and faster approvals are driving both office and residential project momentum despite lingering high vacancy.

Key Takeaways

Investor Momentum Builds

San Francisco’s office investment market is showing signs of a turnaround following years of high vacancies and asset distress, per Bloomberg. The recent sale of a long-stalled downtown development site for $60M signals renewed interest from investors aiming to capitalize on the city’s AI-fueled recovery. Multiple large-scale projects—including a 1,225-foot office tower from Hines and a $750M hotel-office venture by Related Cos.—are advancing as developers respond to increased demand for high-quality office space.

AI Drives Office Demand

The emergence of AI as a dominant sector is boosting leasing demand in San Francisco. Homegrown firms like Anthropic and OpenAI, alongside major financial players, are signing large-scale leases for trophy space. In Q4 last year, tenants leased more than 1 MSF, marking the market’s strongest uptake since 2018. High-profile deals, such as Tiger Global’s lease at the revamped Transamerica Pyramid at roughly $300 PSF, show a willingness to pay premiums for top-tier locations amid limited new supply. That momentum is reinforcing broader signs that AI-driven tenants are reshaping downtown demand patterns and accelerating the city’s office recovery.

Bar chart showing San Francisco leading major US cities in 2025 office leasing as a percentage of inventory at 12%, ahead of Miami and Manhattan.

Development and Policy Tailwinds

City leadership is credited with accelerating San Francisco’s CRE recovery. The administration of Mayor Daniel Lurie has implemented pro-business reforms, sped up permitting processes from years to approximately 90 days, and rolled out financial incentives for conversions of vacant offices to housing. As a result, development applications—both commercial and residential—rebounded to post-pandemic highs in 2025, with notable projects like Crescent Heights’ $1.2B, 67-story apartment tower moving forward.

What’s Next

While trophy office leasing is leading the recovery, San Francisco continues to face historically high office availability (31%). Significant older assets may require years for absorption or conversion, despite the positive momentum in the market. Ongoing policy efforts targeting flexible permitting and support for residential projects suggest a pipeline of mixed-use opportunities ahead.