Artificial Hope: Experts explain how AI could be the answer to saving downtown SF
SAN FRANCISCO (KGO) -- The artificial intelligence buzz is reaching San Francisco's downtown, where vacant office space is at an all-time high.
Downtown's vacancy rate is 30%. That's a record.
"Before the pandemic, it was 5%. We had the hottest office market in the country before the pandemic. We were one of the fastest growing cities in the United States. One of the top two. Then it really hit a 180 during the pandemic, because we had so many tech tenants and tech is really what adopted remote work," said Ted Egan, San Francisco's chief economist.
Our ABC7 news data team confirms office vacancy in the broader San Francisco Metro Area nearly tripled, from a 6.3% vacancy rate in the first quarter of 2019 to a 17.2% vacancy rate in the first quarter of 2023.
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"The good news about downtown San Francisco is that the talent hasn't really left the Bay Area," said Egan.
Egan says AI is giving the city hope, but how realistic is it? Job postings may give us a clue.
"We just looked at generative AI Chat GPT and the new models that are tracking so much attention. We found that 24% of all job postings in the nation were in the Bay Area," said Mark Muro, senior fellow for Brookings Institution.
According to Brooking Institution, a nonpartisan think tank in Washington DC, the vast majority of AI job postings are in the Bay Area.
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"There are a lot of accounts of people actually moving back to the Bay Area to participate in generative AI boom. A lot of this work is early stage work, where you want to be directly in the office with your co-workers. This may add a little bit of energy. It's not a huge number of people," Muro said.
Muro said they've tracked at least 300 AI job postings out of the Bay Area with the majority in San Francisco.
There is also growing interest in vacant office space. According to data from the real estate tech firm VTS "San Francisco experienced a recent spurt of new demand growth, as indicated by 10.2% quarter-over-quarter growth, to which much of their year-over-year growth of 5.9 percent is attributable."
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"It's kind of a leading indicator of people signing leases. It's great news that people are looking for space. That is what you would expect to see before recovery," Egan said.
The Four Seasons Embarcadero is located within the 345 California office building.
"Breakfast meetings happening. Lunch meetings happening. Early sunset drinks before they head out," said Gigi Vega, general manager for the Four Seasons SF Hotel in Embarcadero
Vega is hoping AI brings more business to the area.
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"I'm just really hoping that there is additional interest of AI business coming to San Francisco downtown. It's just a start of other more companies that are alike that would be able to enjoy," Vega said.
Egan said having AI companies move to downtown San Francisco will bring a boost to the area, but it won't be enough for a full recovery.
"It will take a lot of AI growth to fill all of those office buildings. We need probably more than AI but frankly we could be in a position where tech is poised to grow if interest rates go down in the next few years," Egan said.
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