Tech HQ Lease Spurs Hope in Downtown San Francisco
Software firm Rippling's 123K SF office deal may be harbinger of turnaround.
It’s only one lease, but a lot of office owners and operators in San Francisco are fervently hoping we look back on it later this year as a bright green shoot that signaled the beginning of a turnaround for the city’s downtown office market.
Rippling, a work management software company, is upgrading its San Francisco headquarters with a much larger office footprint—in downtown San Francisco.
The tech firm, which currently leases 30K SF at 55 Second Street, has inked a deal for 123K SF at 430 California Street. Rippling is planning to occupy the 11th through 19th floors at the downtown office tower, according to a report in the San Francisco Chronicle.
Rippling, which has 500 employees who currently are required to work in the office three days a week, is in expansion mode, hiring across all of its teams, the report said.
CBRE represented Rippling in the deal, the second-largest office lease signed thus far this year in downtown San Francisco. Last month, fintech firm Adyen agreed to sublease Pinterest’s 150K SF office building at 505 Brannan Street in the SoMa section.
Tenant requirements, a leading indicator of how much space prospective tenants are seeking in the market, are surging in San Francisco.
According to CBRE’s numbers, tenant requirements jumped to 6.3M SF in Q1 2024, rising from 4.2M SF in the fourth quarter and nearly double the 3.4M SF notched in the Q1 2023, according to a report in the San Francisco Business Times.
Tenant requirements are approaching levels not seen since the pre-pandemic peak of San Francisco’s office market, the first quarter of 2020, when requirements hit 6.8M SF.
In terms of the vacancy rate, a lagging indicator, the struggling 88M SF office market hasn’t bottomed out yet.
The office vacancy rate hit 36.6% in San Francisco during the first quarter of 2024, up from 35.6% in the fourth quarter of 2023. Total availability, which includes occupied space, ticked up to 38.7% from the 38.5% recorded at the end of 2023, according to CBRE.