The following reflects San Francisco office market conditions as of Q3 2026.
MARKET DRIVERS
San Francisco’s office market continues to strengthen, driven by growth in the AI and broader technology sectors. What began as leasing demand from smaller and mid-sized venture-backed firms a few years ago has evolved into larger commitments from both established technology companies and rapidly expanding AI firms. Demand is also beginning to spread beyond CBD trophy assets into Class B properties and adjacent submarkets like Rincon/South Beach, MidMarket, Mission Bay, and SoMa. This increase in tenant activity reflects growing business confidence and a strengthening economic outlook.
Tenants remain focused on high-quality space that supports collaboration, employee experience, and future growth, keeping demand concentrated in well-located, amenity-rich buildings. At the same time, limited new construction and declining sublease inventory have created a more favorable supply environment, allowing existing space to absorb demand more effectively. While hybrid work continues to influence utilization, recovery is increasingly being driven by leasing and expansion activity rather than market sentiment alone.
Leasing activity remained strong in Q3 2026, with more than 3M SF leased during the quarter and over 10M SF leased year-to-date. Net absorption was also very strong, exceeding 1M SF in Q3 2026 bringing the year-to-date total to 2.7M SF. Both metrics are on pace for their strongest annual performance since 2018, reinforcing the market’s positive momentum. As a result, the overall vacancy rate declined to 26.0% at quarter-end, down from its 32% peak in 2024, while availability also fell to 27.4% at the end of the quarter.
Demand remains concentrated within Class A properties, which continues to capture the majority of leasing activity (55% of the year-to-date total) and net absorption gains (65% of the year-to-date total) in 2026. However, the recovery is also supported by a broader tenant base. Through 2026, nearly 60% of new office leases signed were under 5,000 SF and more than 75% were under 10,000 SF, emphasizing the role of smaller growth-oriented firms and the continued preference for flexibility and efficient footprints.
ECONOMIC REVIEW
San Francisco’s economy continues to find solid footing, supported by its position as a global technology and innovation hub. Venture capital investment remains active, while growing AI, software, and advanced computing firms continue to support job creation and office demand. Although hiring is more measured than in previous growth cycles, the labor market remains healthy, with unemployment near 4% and employment posting modest gains. More importantly, many companies have shifted from cost containment toward growth and expansion.
These trends are supporting the stronger office market fundamentals seen in 2026. Companies are starting to make longer-term real estate decisions and placing greater value on workplaces that foster collaboration, innovation, and employee engagement. While hybrid work continues to shape workplace strategies, recovery is also being driven by business expansion, capital investment, and growth across key industries.
NEAR-TERM OUTLOOK
The strengthening office market is expected to persist as demand broadens into a wider range of industries. While AI and technology firms will remain key drivers of activity, companies across multiple sectors are actively evaluating space needs and making longer-term occupancy decisions. At the same time, declining sublease inventory and limited new construction are creating a more balanced supply-demand environment.
Demand remains concentrated in high-quality buildings as tenants continue to prioritize amenities, accessibility, and workplace experience. This flight to quality is expected to continue, further widening the gap between top-tier assets and many older Class C properties lacking modern upgrades. While economic uncertainty and evolving workplace strategies remain potential headwinds, market fundamentals continue to improve. As demand expands and availability declines, San Francisco remains well positioned for sustained office market recovery and growth.
Frequently Asked Questions
What is the office vacancy rate in San Francisco in Q3 2026?
The overall office vacancy rate in San Francisco was 26.0% at the end of Q3 2026, down from 27.2% in Q2 2026 and 31.1% in Q3 2025, a decline of 510 basis points year over year, according to Kidder Mathews research. The direct vacancy rate was 23.8%, compared with 24.7% in Q2 2026 and 27.0% a year earlier. Overall vacancy has fallen from its 32% peak in 2024. (Data source: CoStar)
What is the office availability rate in San Francisco in Q3 2026?
The total office availability rate in San Francisco was 27.4% at the end of Q3 2026, according to Kidder Mathews research. By building class, availability was 27.7% for Class A, 28.3% for Class B, and 20.0% for Class C. By submarket, availability ranged from 7.5% in Civic Center to 57.0% in Yerba Buena. (Data source: CoStar)
How much office space was leased in San Francisco in Q3 2026?
San Francisco office leasing activity totaled 3,036,496 SF in Q3 2026 and 10,025,959 SF year-to-date, up 33.8% from 7,495,348 SF in the same period of 2025, according to Kidder Mathews research. Year-to-date leasing is on pace for the strongest annual performance since 2018. Nearly 60% of new office leases signed in 2026 were under 5,000 SF. (Data source: CoStar)
What was office net absorption in San Francisco in Q3 2026?
San Francisco office net absorption was positive 1,068,105 SF in Q3 2026 and 2,752,556 SF year-to-date, compared with negative 553,341 SF in the same period of 2025, according to Kidder Mathews research. Net absorption measures the change in occupied space, so a positive figure means more space was taken up by tenants than was vacated. Class A properties captured 65% of the year-to-date total. (Data source: CoStar)
Which San Francisco office submarkets led net absorption in Q3 2026?
The South Financial District led San Francisco office net absorption in Q3 2026 with 890,144 SF, followed by Showplace Square with 189,149 SF and Union Square with 131,311 SF, according to Kidder Mathews research. The weakest submarkets were Mission Bay/China Basin at negative 113,289 SF and Van Ness Corridor/Chinatown at negative 102,587 SF. (Data source: CoStar)
What are average office asking rents in San Francisco in Q3 2026?
The estimated average asking rent for San Francisco office space was $74.79 per SF on a full service gross basis in Q3 2026, up 8.7% from $68.80 in Q3 2025 and up from $72.54 in Q2 2026, according to Kidder Mathews research. By submarket, estimated asking rents ranged from $42.42 in Rincon/South Beach to $118.87 in Mission Bay/China Basin. By class, rents averaged $79.34 for Class A, $63.00 for Class B, and $52.58 for Class C. (Data source: CoStar)
How much office space is under construction in San Francisco in Q3 2026?
No office space was under construction in San Francisco at the end of Q3 2026, compared with 381,750 SF in Q2 2026, according to Kidder Mathews research. No new office space was delivered in Q3 2026 or year-to-date in 2026, versus 212,796 SF delivered in the same period of 2025. Limited new construction has contributed to a more favorable supply environment. (Data source: CoStar)
How much office space sold in San Francisco in Q3 2026?
San Francisco office sale volume totaled 1,062,670 SF in Q3 2026 and 3,820,735 SF year-to-date, down 1.3% from 3,869,564 SF in the same period of 2025, according to Kidder Mathews research. Five significant sales were reported for the quarter, with sale prices ranging from $25,200,000 to $50,688,745. (Data source: CoStar)
What was the biggest office sale in San Francisco in Q3 2026?
Kidder Mathews research identifies 180 Post St in the Union Square submarket as the biggest office sale of Q3 2026, with a sale price of $48,500,000, or $1,375 per SF, for 35,285 SF. Silver Gate Property II, LLC was the buyer and Grosvenor was the seller. The highest total sale price among the quarter’s significant sales was 818-875 Howard St in Yerba Buena at $50,688,745 for 216,152 SF. (Data source: CoStar)
What was the largest office lease in San Francisco in Q3 2026?
The largest significant office lease in San Francisco in Q3 2026 was a 182,054 SF sublease to Cognition at 333 Brannan St in Rincon/South Beach, signed in August 2026, according to Kidder Mathews research. Other significant leases included Hinge Health at 300 Mission St (119,274 SF), Brex at 270 Brannan St (116,853 SF), and Airbnb at 200 Rhode Island St (101,782 SF). (Data source: CoStar)
What is the San Francisco office market outlook after Q3 2026?
Kidder Mathews research expects the strengthening San Francisco office market to persist as demand broadens beyond AI and technology firms into a wider range of industries. Declining sublease inventory and limited new construction are creating a more balanced supply-demand environment. Demand is expected to remain concentrated in high-quality buildings, widening the gap between top-tier assets and older Class C properties lacking modern upgrades.
Last updated: Q3 2026. Data source: CoStar, Kidder Mathews, Bureau of Labor Statistics, California EDD. Compiled by the Kidder Mathews Research Group.
Q3 2026 San Francisco Office Market: Key Data Points
Explore our full San Francisco office market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy: The overall vacancy rate fell to 26.0% in Q3 2026, down 510 basis points from 31.1% a year earlier. The direct vacancy rate was 23.8%.
- Availability: The total availability rate was 27.4% at the end of Q3 2026.
- Leasing Activity: Leasing totaled 3,036,496 SF in Q3 2026 and 10,025,959 SF year-to-date, up 33.8% from the same period of 2025.
- Net Absorption: Net absorption was 1,068,105 SF in Q3 2026 and 2,752,556 SF year-to-date, compared with negative 553,341 SF in the same period of 2025.
- Asking Rents: The estimated average asking rent rose 8.7% year over year to $74.79 per SF on a full service gross basis, from $68.80 in Q3 2025.
- Construction: No office space was under construction at the end of Q3 2026, and no new space was delivered year-to-date.
- Sales: Sale volume totaled 1,062,670 SF in Q3 2026 and 3,820,735 SF year-to-date, down 1.3% from the same period of 2025.
Submarket Statistics
| Submarket | Total Inventory (SF) |
Direct Vacancy Rate |
Total Vacancy Rate |
Total Availability Rate |
Q3 2026 Total Net Absorption (SF) |
YTD Total Net Absorption (SF) |
Q3 2026 Leasing Activity (SF) |
Q3 2026 Estimated Asking Rent |
|---|---|---|---|---|---|---|---|---|
| Civic Center | 633,079 | 26.9% | 26.9% | 7.5% | -46 | -11,802 | 806 | $43.85 |
| Financial District | 30,384,909 | 27.2% | 28.8% | 29.4% | -10,648 | 152,437 | 835,336 | $75.03 |
| Jackson Square | 2,438,177 | 21.3% | 23.5% | 21.2% | -49,226 | -134,068 | 84,640 | $74.95 |
| Mid Market | 4,956,345 | 32.1% | 32.1% | 38.6% | -34,941 | 223,508 | 11,000 | $51.31 |
| Mission Bay/China Basin | 4,554,867 | 10.5% | 12.9% | 18.5% | -113,289 | 264,367 | 24,322 | $118.87 |
| Mission/Potrero | 1,848,297 | 12.8% | 13.7% | 13.7% | -31,642 | -37,971 | 34,508 | $62.97 |
| Rincon/South Beach | 6,858,067 | 20.3% | 29.4% | 28.5% | 87,267 | 99,867 | 451,898 | $42.42 |
| Showplace Square | 4,402,813 | 12.9% | 17.4% | 29.8% | 189,149 | 295,013 | 281,479 | $62.25 |
| South Financial District | 29,286,801 | 20.0% | 21.7% | 23.4% | 890,144 | 1,786,899 | 808,606 | $79.64 |
| SOMA | 3,664,007 | 29.5% | 30.8% | 27.2% | 83,632 | 61,229 | 154,340 | $72.99 |
| Union Square | 5,310,638 | 26.3% | 27.7% | 27.8% | 131,311 | 38,565 | 205,121 | $56.08 |
| Van Ness Corridor/Chinatown | 1,639,075 | 17.5% | 17.6% | 17.2% | -102,587 | -29,356 | 2,128 | $48.27 |
| Waterfront/North Beach | 3,721,553 | 21.5% | 22.0% | 23.9% | 84,811 | 247,373 | 102,998 | $72.20 |
| Yerba Buena | 3,568,472 | 52.6% | 56.9% | 57.0% | -55,830 | -203,505 | 39,314 | $68.45 |
| Total | 103,267,100 | 23.8% | 26.0% | 27.4% | 1,068,105 | 2,752,556 | 3,036,496 | $74.79 |
| Class | Total Inventory (SF) | Direct Vacancy Rate | Total Vacancy Rate | Total Availability Rate | Q3 2026 Total Net Absorption (SF) | YTD Total Net Absorption (SF) | Q3 2026 Leasing Activity (SF) | Q3 2026 Estimated Asking Rent |
|---|---|---|---|---|---|---|---|---|
| Class A | 59,977,724 | 23.3% | 25.7% | 27.7% | 684,587 | 1,796,662 | 1,767,812 | $79.34 |
| Class B | 36,284,481 | 25.2% | 27.3% | 28.3% | 327,806 | 936,616 | 1,142,739 | $63.00 |
| Class C | 7,004,895 | 19.9% | 21.0% | 20.0% | 55,712 | 19,278 | 125,945 | $52.58 |
Significant Sale Transactions Q3 2026
| Property | Submarket | SF | Sale Price | $/SF | Buyer | Seller |
|---|---|---|---|---|---|---|
| 180 Post St | Union Square | 35,285 | $48,500,000 | $1,375 | Silver Gate Property II, LLC | Grosvenor |
| 410 Townsend St | South of Market | 78,000 | $47,400,000 | $608 | Zurich U.S. | New York Life | Bridgeton Hldgs. |
| 818-875 Howard St | Yerba Buena | 216,152 | $50,688,745 | $235 | Howard Street SF Ventures, LLC | Howard Street Associates, LLC |
| 536 Mission St | South Financial District | 141,750 | $31,652,500 | $223 | Lincoln Property Company | McCourt Partners | Golden Gate University |
| 417 Montgomery St | Financial District | 96,090 | $25,200,000 | $262 | 417 Montgomery, LLC | CCT Enterprises |
Significant Lease Transactions Q3 2026
| Property | Submarket | SF | Transaction Date | Deal Type | Tenant |
|---|---|---|---|---|---|
| 333 Brannan St | Rincon/South Beach | 182,054 | August 2026 | Sublease | Cognition |
| 300 Mission St | South Financial District | 119,274 | August 2026 | New Lease | Hinge Health |
| 270 Brannan St | Rincon/South Beach | 116,853 | July 2026 | New Lease | Brex |
| 200 Rhode Island St | Showplace Square | 101,782 | August 2026 | New Lease | Airbnb |
| One Market Plz | South Financial District | 76,285 | August 2026 | New Lease | The Walt Disney Company |
Data as of Q3 2026. Source: CoStar, Kidder Mathews, Bureau of Labor Statistics, California EDD. Prepared by the Kidder Mathews Research Group.
ContactGARY BARAGONA |
Related ContentYou may also be interested in our other research: all office market reports, San Francisco life science market report, San Francisco retail market report, Oakland/East Bay office market report, Peninsula/San Mateo office market report, Silicon Valley office market report, San Francisco office location. |