Victor Coleman highlighted that the West Coast office market is recovering, led by emerging AI and tech companies, with San Francisco experiencing its largest quarter of occupancy increase in 7 years.
Over 1 million square feet of positive net absorption was driven by tech sector demand, including new leasing and large deals over 100,000 square feet for the first time in a long period.
Billions of venture capital dollars continue to flow into AI, with job postings trending upward, and West Coast gateway markets like the Bay Area expected to benefit most due to their talent, funding, and research ecosystems.
Core AI tenants, creating and licensing AI models and infrastructure, currently represent only 10% of the company's ABR and are concentrated in the Bay Area, indicating significant expansion potential.
Record Leasing Activity and Market Rebound in 2025
Q2 leasing totaled 712,000 sq ft, the most since 2018, with over 1 million sq ft year-to-date.
Approximately 2/3 of leasing activity involved new tenants, including full-floor deals.
Leasing momentum has driven lease percentage up 140 basis points YoY to 88.7%, approaching the 89-90% target for year-end.
Out-of-service portfolio (Minneapolis, Orlando) is performing well, with leasing approaching 60%, expected to stabilize by end of 2026.
Rental rates for trophy offices and new construction hit record highs, with asking rents at $92/sq ft, up 27% YoY, driven by limited new supply and high construction costs.
Dafinchi