San Francisco and New York office markets are both on the upswing but with different trajectories, according to a Transwestern analysis. San Francisco is surging ahead, buoyed by returning tenants, a revitalized downtown, and record tech investment, while New York is recovering more gradually, anchored by steady renewals, rising tenant confidence, and a diverse economic base that is stabilizing absorption and rents.
In San Francisco, a stronger economy and business-friendly policies from new City Hall leadership are encouraging tenants to return. Offices are filling up, retail and social activity are picking up, and downtown feels more vibrant than it has in years, signaling that the city’s long-awaited comeback is taking shape, said Transwestern.
Office demand in San Francisco jumped 112% year over year during the third quarter, the largest increase among U.S. cities, with leasing activity up 158% over two years. Roughly 6.5 million square feet were leased in Q3, with 7.4 million square feet in prospective deals. Net absorption returned to positive, at 64,144 square feet in Q3, bringing year-to-date absorption to 115,356 square feet, while vacancy fell 100 basis points. Rents are stable at $62 per square foot, with Class A at $74.50, and premium offices with views at $100.
Bay Area venture capital funding remains strong at $150 billion YTD, representing 54% of U.S. VC activity, including 75% of national AI VC funding ($98 billion). Public transit usage has rebounded to 82% of pre-pandemic levels locally and 13% among commuters from outside the city, while office attendance sits at 42.5%. Unemployment remains steady at 4%, down from a pandemic peak of 14% in mid-2020.
Meanwhile, New York has posted five straight quarters of strong fundamentals, including robust absorption, lower sublet space, and improved market confidence. The return to office trend is boosting retail and restaurant activity, while hiring in sectors such as healthcare and education continues to underpin office demand and economic growth, the report said.
Office leasing activity grew 34% year over year in Q3, driven by renewals and expansions. Average quarterly leasing is 9.3 million square feet, nearly matching the five-year pre-pandemic average, while deal sizes have increased 40% from 2023 lows to 12,500 square feet, though slightly below earlier levels in the year.
Net absorption is positive across all Manhattan submarkets, with Class A and B assets posting five consecutive quarters of gains. Vacancy has fallen 10 basis points, while overall availability has dropped 390 points.
Rents are stabilizing, with Class A and trophy offices exceeding $200 per square foot and Class B rates creeping higher amid limited new construction.
New York City’s unemployment is 4.9%, stable since 2022 and down from 21.5% in 2020, in line with pre-pandemic levels. Office attendance sits at 53%, and subway ridership hit record highs in Q3. Venture capital funding remains solid, with $23.3 billion raised so far this year, following $27.4 billion in 2024, the report said.
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