SAN JOSE — Empty offices haunt the downtown districts of the Bay Area’s three largest cities, a new report shows, an indicator that companies and workers still shun the cores of this region’s urban centers.
During the April-through-June second quarter of 2024, office buildings were about one-third vacant in downtown San Jose, downtown Oakland and downtown San Francisco, CBRE, a commercial real estate firm, reported.
The vacancy rates in the downtown districts of these three major cities set all-time highs, or equaled record levels, during the second quarter, the CBRE report disclosed.
Here are some of the details for the second-quarter office vacancy levels in the urban cores of the three cities:
— San Francisco suffered the worst vacancy rate for its office buildings — by far — when comparing the three downtowns. The San Francisco office vacancy was 36.8% in the second quarter and was a record high.
— Downtown Oakland posted a 31.8% office vacancy level, an all-time high.
— Downtown San Jose experienced a 31.5% office vacancy, which equaled the January-through-March first quarter of 2024 and the vacancy level of the July-through-September third quarter of 2023.
Subleasing efforts by tenants that seek to exit their office spaces could worsen the vacancy problem in the Bay Area generally and the downtown markets in particular.
Widespread job cuts by tech companies and a reduction in the tech industry’s appetite for employment hubs have helped keep office buildings empty throughout the Bay Area.
It’s also clear that even after the end of coronavirus-linked business shutdowns ordered by state and local government officials, employees have not returned to their workplaces to the same extent as before the COVID outbreak.
The problems appear to be particularly acute in the downtown districts, an analysis of the CBRE report shows.
While the office vacancy rate in downtown San Jose was 31.5% in the second quarter, office vacancies totaled 19.5% in Silicon Valley overall.
Similarly, the downtown Oakland vacancy rate of 31.8% was far worse than the overall office vacancy level of 21.8% for the East Bay region comprising Oakland, Berkeley, Emeryville, Alameda, San Leandro and Richmond.
San Jose business and political leaders, alarmed by the absence of office workers, have placed a greater focus on what Mayor Matt Mahan calls the “experience economy” as a way to entice more people to come to that city’s downtown.
The experience economy in downtown San Jose consists of greater offerings of unique entertainment and restaurant venues due to the lack of office employees.
Some indications have emerged that cutting-edge companies such as providers of artificial intelligence technologies could help bolster the three downtown districts.
“Increased demand from AI-affiliated companies helped to bolster active requirements” for by companies that are scouting for office space in Silicon Valley, CBRE reported.
