Sky-high office vacancy levels haunt Bay Area’s three major downtowns
The Big Picture
Downtown office markets across the Bay Area — including San Jose, San Francisco, and Oakland — remain stuck with vacancy rates above 30%, despite a wave of high-profile leasing activity driven largely by AI firms. A new report from Cushman & Wakefield shows that the long-anticipated post-pandemic recovery has stalled, with companies still hesitant to bring workers back full-time. While some new deals are getting done, they haven’t been enough to materially reduce the glut of empty space in the region’s core business districts.
Why it Matters
This isn’t a short-term dip — it’s a structural shift. Office vacancy levels remain nearly three times higher than pre-pandemic levels, and there’s growing recognition that demand may not fully return to prior norms.
For downtown San Jose, the challenge is even more pronounced. It’s not just competing with remote work — it’s competing with newer, amenity-rich districts like Santana Row and Sunnyvale’s Cityline, which are attracting tenants with a more complete live-work-play environment.
There are signs of adaptation. Landlords are shifting strategies, breaking up large blocks of space to attract smaller tenants, while AI companies are emerging as a key source of demand. But even with these adjustments, recovery is expected to be slow, with some projections suggesting it could take years to meaningfully reduce vacancy levels.