SF office leasing activity rides AI wave to near 30-year high

San Francisco’s office market is experiencing its highest leasing activity in nearly three decades, with AI companies leading the demand. Tenants leased approximately 6.4 million square feet in the first half of 2026, including 2.1 million square feet in April and May alone, according to Newmark data cited by the San Francisco Business Times. At this pace, annual leasing volume could reach 15.3 million square feet, matching the peak seen in 1996. The surge is primarily driven by AI startups backed by significant venture capital. San Francisco saw $252 billion in venture funding in the first five months of 2026, more than double the $117 billion raised in all of 2025. This influx of capital has directly translated into increased office demand, as companies quickly outgrow their current spaces. Tech firms now account for half of the total tenant demand, with AI companies alone making up about a quarter. Tenant priorities have shifted, with many venture-backed firms now seeking fully built-out offices rather than discounted subleases. This shift has reduced available sublease space from nearly 10 million square feet in mid-2023 to about 3.4 million square feet today. OpenAI and Anthropic, two major players in the AI sector, each surpassed 1 million square feet in leased space this spring. OpenAI has been expanding in Mission Bay over the past three years, while Anthropic has grown near its South of Market headquarters. The AI boom is also straining San Francisco’s residential market, with increased demand from tech workers pushing up rents and home prices. The city’s ongoing mansion shortage has led to rapid sales, often exceeding asking prices. This dual pressure on commercial and residential real estate reflects the broader economic impact of AI-driven growth in the region.