Wow, according to this report AI firms are looking for 2.5 million sf of office space in the San Francisco area and another 1.7 million sf in New York. Hopefully they will start considering Denver where we have much cheaper rents, lots of inventory, and good base of tech workers.

AI Firms Are Hunting for A Lot of Office Space

By David M. Levitt

Artificial intelligence. Will it become the space user that boosts an office market hungering for tenants?

The jury is still out on that question. But the initial indicators look good.

“In a market as challenged as San Francisco is, it is the one bright spot that is showing growth,” said Derek Daniels, regional director of research for brokerage Colliers (CIGI). His remit includes the San Francisco Bay Area, which encompasses San Francisco proper and Silicon Valley, where many of the innovations in computer and information technology get their start. “Companies are saying we are going to commit to more space than we had previously.”

In a rare bit of good news, the largest lease in the fourth quarter of 2023 in the San Francisco office market was OpenAI’s commitment to 486,600 square feet at 1455 and 1515 Third Street in the Mission Bay submarket, Daniels said.

And the second-largest was the AI startup Anthropic taking 230,315 square feet at 500 Howard Street in the city’s South Financial District. Anthropic describes itself on its website as a company that produces “AI research and products that put safety at the frontier.” As for OpenAI, it famously introduced content generator ChatGPT in November 2022. 

The large deals were indicative, Daniels said, of an AI industry that needs the traditional advantages of an office — a place where workers can gather, learn company culture, pass along tips and collaborate — to keep growing.

“No one can predict the future, but if investment continues to grow in the AI space, there’s no reason to believe that Wall Street won’t help it expand its markets just like other tech users have,” Daniels said. “The industry grew from Silicon Valley and expanded into other markets. The Bay Area is currently the home of AI, but there’s no reason to believe it won’t expand outside.”

There’s no shortage of disappointment in commercial real estate, especially in the office market. In its national fourth-quarter office report, Colliers said the office market “limped” into 2023, and barely improved as the year played out. Nationally, the vacancy rate at the end of 2023 was 16.9 percent, higher than the 16.3 percent peak during the Global Financial Crisis of 2008 to 2010.