Databricks, a software firm whose value has swelled alongside the rise of artificial intelligence, is poised to be the next San Francisco company to go public and mint a new collection of millionaires.
In conjunction with the $10 billion funding round it announced in December, for a valuation of $62 billion, the company told employees at its big annual kickoff meeting last month it was negotiating a new lease that would see it dramatically expand its office presence — mostly relocating from 160 Spear St. to a new building yet to be announced — according to two people in attendance.
But large leases like this have been few and far between in recent years. Instead, the city’s office market had been largely defined by Big Tech’s retreat, which has led to sky-high commercial vacancy rates and a cascade of commercial debt crises for property owners.
At the halfway point of the decade, with the city’s status as the epicenter of technological innovation all but reaffirmed, the pullback appears to have paused, as evidenced by the office vacancy rate declining for the first time in 19 quarters, from 36.9% to 36.7%.
Maurice Spikes, a broker at Newmark who represents tenants, has seen this change first-hand over the past five years. Unlike most of 2023 and 2024, when brand-name AI companies led the leasing charge, a broader range of tech companies have been active in recent months.
“Overall, there is a re-commitment to the office that many companies are trying to figure out right now,” Spikes said. “The solution will depend on what stage the company is in.”
At the top end of the market, established companies have locked down long-term leases in the last quarter. In many cases, they’ve used this window as an opportunity to scale down underused space and consolidate. Google, for example, sunsetted its lease at One Market Plaza and added more than 100,000 square feet to its presence at Hills Plaza at 345 Spear St.
According to real estate firm CBRE, there have been three leases of 100,000 square feet so far this year, all of them renewals that also expanded existing space. Of the 2.3 million square feet of office space leased last quarter, renewals accounted for more than 1.3 million.
“Companies are committed to maintaining high-quality, vibrant, and well-located office spaces for their teams that are increasingly returning to the workplace,” said CBRE’s Colin Yasukochi. “With that, many companies are also reconfiguring the office and creating more collaboration spaces and private areas for calls so that it’s a place employees want to work in.”
JPMorgan Chase, which recently added more than 279,000 square feet to its headquarters at 560 Mission St., did so after giving up nearly an equal amount of space last year at One Front Street. That space was previously occupied by the failed First Republic Bank, which JPMorgan acquired in 2023.
The banking giant has been aggressive with return-to-office mandates. When CEO Jamie Dimon was asked about pushback on the five-days-a-week office policy during a recent staff meeting, he reportedly said: “Don’t waste time on it. I don’t care how many people sign that fucking petition.”
For Spikes’ clients, who are primarily in tech, there’s been a notable increase in demand for office space in SoMa, particularly near South Park and Oracle Park. This uptick is due to the area’s proximity to Mission Bay, a submarket with limited office availability, and its access to transit, connecting the neighborhood to the Peninsula, where many tech workers live.
According to Newmark data, the majority of tenant demand in the market is for small to mid-sized office spaces, typically fewer than 20,000 square feet.
Regardless of size, prices vary widely. According to Spikes, premium office spaces can command up to $165 per square foot, while commodity spaces can be secured for as little as $30.
“Quality, turnkey space under 20,000 square feet is extremely competitive,” Spikes said. “If you wait too long to put in an offer and do not negotiate quickly, you risk losing out on the ideal space.”