San Francisco Office Leasing Hits Record Highs as Real Vacancy Nears 15%, Newmark’s Adler Says

Why this matters

San Francisco’s office leasing reaching record highs amid a real vacancy rate closer to 15 percent signals a nuanced recalibration in one of the nation’s most scrutinized CRE markets. The divergence between headline vacancy figures and Newmark’s granular analysis suggests that traditional metrics may overstate underlying slack, reflecting a market in transition rather than outright distress. For institutional investors and lenders, this implies a potential inflection point where leasing momentum is beginning to absorb excess supply, albeit from an elevated base. This development matters because it challenges prevailing narratives of persistent weakness in gateway office markets, highlighting pockets of resilience driven by selective tenant demand and possibly improved space economics. It also underscores the importance of granular, asset-level data in assessing true market health, which can influence underwriting assumptions and portfolio positioning. From a capital flow perspective, rising leasing activity could encourage cautious re-entry or increased allocation to office assets in San Francisco, contingent on sustained demand and stabilization of vacancy. For lenders, improving occupancy trends may alleviate some pressure on underwriting risk, though the sector’s broader structural challenges remain unresolved.

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