Green shoots of activity are beginning to sprout across San Francisco's battered office market landscape, this time with a deal one of the city's leading investment firms has signed to more than double its footprint and relocate within downtown's bounds.
Forge Global, a private securities marketplace, finalized a sublease agreement to take over the entire 15th floor of Four Embarcadero Center, one of the towers in the Boston Properties-owned complex that overlooks the waterfront and is one of the largest mixed-use properties in the western United States. The San Francisco-based investment firm will take over the space from JLL, which the brokerage used as a hub for its technology services division.
The sublease agreement will run through the end of 2025, according to information filed with the Securities and Exchange Commission, and Forge is expecting to spend $2 million for the duration of the term.
At nearly 21,800 square feet, the sublet arrangement at Four Embarcadero Center isn't expected to make much of a dent in San Francisco's unprecedented sublease availability. Even so, it is more than double the roughly 10,800-square-foot office that Forge currently leases at the nearby Salesforce Tower. The firm's lease at 415 Mission St. is slated to expire at the end of this year, according to CoStar data.
The city, which before the pandemic had been the priciest office market in the nation, has struggled in recent years due to the fallout from remote work, layoffs and other corporate cost cuts and an office vacancy rate that in some downtown neighborhoods surpasses 30%. Office-use rates are among the lowest in the country, according to data compiled by Kastle Systems.
Usage is still about 45% below pre-pandemic levels.
Rising Vacancy Rate
In downtown San Francisco, the average vacancy rate among leased office buildings has jumped past 26% from the less than 7% reported in 2019, according to CoStar data.
Large tech companies such as Meta and Salesforce have contributed hefty chunks to the nearly 13 million square feet of available sublease space across the market, adding even more pressure to declining rents and landlords competing with their empty listings.
Despite the gloomy figures, there are signals hinting that the city is in the early stages of an economic recovery.
Companies in the artificial intelligence industry, in which Forge has made a number of investments, have signed several leases over the past several months to expand real estate footprints in San Francisco and begin chipping away at the city's record amount of sublet availability.
Forge expects to relocate to its new headquarters in December. The firm's real estate portfolio also includes offices in Silicon Valley, New York, Hong Kong, and Sioux Falls, South Dakota, according to its website.
Neither Forge nor JLL immediately responded to CoStar News' requests to comment.
This story was updated Aug. 31 to identify a Forge Global office location as being in South Dakota, not Idaho.