San Francisco Bay Area Commercial Real Estate Market Update – 2025 Trends, Insights & What’s Ahead

The commercial real estate (CRE) landscape in San Francisco is evolving rapidly in 2025, shaped by shifting business needs, economic headwinds, and renewed confidence in the city’s core markets. Below, we break down the latest trends, key statistics, and what these changes mean for investors, property owners, and tenants.

Leasing Activity: Signs of Recovery

After a challenging few years, leasing volume in the San Francisco Bay Area is on the rebound:

• Q1 2025 Leasing Volume: Approximately 4.8 million square feet leased, up 12% year-over-year (source: CBRE).

• Top Sectors: Tech remains dominant, but biotech, legal, and financial services are increasing their footprint.

• Tenant Priorities: Energy-efficient, Class A buildings in central locations are in highest demand. Flexible workspaces and upgraded amenities are now standard expectations.

Vacancy and Absorption Rates

• Downtown SF Vacancy Rate: 22.4% in Q1 2025 (down from 24.1% in Q4 2024), showing slow but steady improvement.

• Net Absorption: +310,000 square feet, the second consecutive positive quarter after a prolonged downturn.

• Sublease Space: Still elevated, but trending downward as companies recommit to in-person and hybrid models.

Sales and Investment Activity

• Total Sales Volume: $1.2 billion in Q1 2025, a 9% increase from the previous quarter but still 35% below pre-pandemic levels (source: JLL).

• Cap Rates: Averaging 5.8% for Class A office assets, reflecting both risk and long-term optimism.

• Investor Interest: Domestic and international investors are targeting prime assets like Salesforce Tower and Embarcadero Center, seeking value-add opportunities.

Notable Transactions

• Salesforce Tower: Lease renewals and expansions by tech and consulting firms have kept occupancy rates above 90%.

• Mission Bay: Biotech leasing surged, with over 500,000 square feet signed in the first half of 2025.

What’s Driving the Market?

• Hybrid Work: Most companies have settled on flexible policies, driving demand for high-quality, collaborative office environments.

• Talent Attraction: Central locations with transit access and amenities are crucial for recruiting and retaining top talent.

• Sustainability: LEED-certified and energy-efficient buildings command premium rents and higher occupancy.

Outlook for 2025

While challenges remain—especially in older, less-adaptable properties—the outlook for San Francisco’s commercial real estate is cautiously optimistic. Leasing momentum, steady absorption, and targeted investment all point to a market regaining its footing.

Are you considering a move, investment, or lease in San Francisco?
Ipiriye offers personalized, data-driven guidance for buyers, sellers, and tenants navigating today’s market. Reach out for a tailored analysis or to discuss your commercial real estate goals.