AI-Driven Plug-And-Play Leads to Major Office Availability Decline in San Francisco
As AI-based firms in California expand, the Waterfront/North Beach and Financial District submarkets in San Francisco have seen a significant decrease in total office availability at -6.5% and -5.7% over the past year, according to a report from Avison Young.
Landlords in these areas are increasingly adopting plug-and-play solutions tailored for AI companies to move in right away.
These solutions come with internet, furniture, etc, and that office has all the elements necessary for a tenant to move in almost immediately.
“The pros are that tenants can move in immediately, which is typically the case with AI companies,” according to Louis Thibault, manager of market intelligence for Avison Young's West Region.
“They want their employees to be in the office as soon as possible, as they feel this is the best environment to collaborate and innovate.”
For the landlord, this plug-and-play scenario typically costs more money without the promise of a tenant moving in, he said.
“Ultimately, it's an investment for landlords, and they are taking a chance that someone will want to move into this space.”
Overall, the Mission Bay, Potrero Hill, and Mission submarkets have led the San Francisco market’s overall office recovery, posting the steepest declines in total availability over the past two years at -46.4%, -29.4% and -22.9, respectively, according to Avison Young. This far outpaces the broader market’s modest -3.8% drop.
This situation is also occurring in the Los Angeles area.
In fact, after nearly a year-long search for the right space in Beverly Hills, one PR firm ultimately chose a private office at the new Industrious Beverly Hills because of its plug-and-play model.
“As a tenant, especially when running a smaller company, the ability to walk into a fully furnished office—with Internet, amenities, and all the essentials already in place—was worth the premium,” Amy Rossetti, CEO, R[AR]E Public Relations, told GlobeSt.com.
“It allowed us to move in without the headaches of buildouts, furniture orders, or managing vendors, and instead focus immediately on our work. For many businesses, that convenience and efficiency is invaluable.”
Source: GlobeSt/ALM