CBRE: San Francisco's office vacancy rate rose to 24.2% in Q2 2022, up 0.4% QoQ, as tech companies' flexible return-to-office demands slows the city's recovery
downtown Atlanta is mostly infrastructure for tourists/conventions and underutilized parking garages: https://www.cnbc.com/... https://twitter.com/... Jennifer Elias / @jenn_elias : Marshall Luck is among a handful of DT San Francisco small business owners who made it through the pandemic only to face weak office returns. He & others tell me they're holding out for their main customer base—big tech workers—even as vacancies rise. https://www.cnbc.com/... Myles Younger / @myles_younger : “At the downtown Rincon Center, where Twilio is located, the food court has been almost entirely stripped out” 😢 That was once a thriving food court with some good lunch options. https://twitter.com/...
Context & Ripple Effects
This CBRE reading is the first hard number on what downtown merchants had been reporting anecdotally: with tech employers keeping offices largely empty, vacancy climbed to 24.2% and the Rincon Center food court where Twilio sits has been almost entirely stripped out. It lands mid-arc — months before Bloomberg counted only 43.1% of San Francisco workers back at offices, the lowest of any major US city tracked.
First-order effects
- Downtown small businesses like Marshall Luck's are the immediate casualties: their customer base is big tech workers who aren't returning, and owners say they're holding out rather than relocating.
- Landlords absorb the direct hit as vacancy ticks up another 0.4 points QoQ to 24.2%, with Twilio's flexible return-to-office policy leaving entire floors of anchor buildings like Rincon Center effectively dark.
Second-order effects
- Empty offices compress the tax and foot-traffic base that funds downtown services, pushing the city toward the deeper hollowing-out Bloomberg documented five months later.
- The eventual demand recovery bypasses this stock: when tech companies' office leasing rebounded to 9.9M square feet in late 2024, it was driven by new AI companies rather than the incumbent tenants that vacated these buildings.
Third-order effects
- If the pattern holds, San Francisco splits into two markets — a housing market repricing upward on AI-driven demand (rents up 14% YoY by early 2026) while older office inventory struggles — and talent itself migrates, with NYC overtaking the Bay Area as the top tech job market.
The trend: Hybrid work is decoupling tech employment from downtown office occupancy, letting cities like New York capture the jobs while San Francisco's recovery runs through housing and AI startups instead of legacy office towers.