OpenAI close to signing S.F.’s biggest office lease since 2018
OpenAI, poster child for the global artificial intelligence boom, is nearing a massive office lease of around 445,000 square feet that would be San Francisco’s largest such deal since 2018.
The maker of ChatGPT and DALL-E 2 could sign a sublease with Uber at the ride-hailing company’s Mission Bay headquarters within weeks, said three real estate sources tracking the potential deal.
With room for over 2,000 employees, the two buildings on Third Street would give the Sam Altman-led company room to roughly triple its workforce. It would be a major lift to San Francisco’s pandemic-ravaged office market, whose vacancy rate soared to a record 34% in September.
OpenAI didn’t respond to a request for comment, while Uber had no immediate comment.
Because the potential deal is for sublease space, it would require approval from landlords that include Uber, Alexandria Real Estate Equities and the Golden State Warriors, which could extend its finalization by weeks. Alexandria and the Warriors did not immediately respond to messages seeking comment Thursday.
The buildings are part of the four-structure office complex that was built alongside Chase Center. Uber took all 1 million square feet of office space next to the arena in 2017 for its new global headquarters. But after the pandemic the company sought to sublease a portion of its space after letting employees work remotely for part of the week. Uber is still paying rent at its former headquarters at 1455 Market St. as well, where it hasn’t been able to find a subtenant.
If it closes, OpenAI’s deal would be the “most impactful single deal” recorded in the market in years, said Derek Daniels, regional research director at real estate brokerage Colliers.
In another major AI sublease deal, fast-growing Anthropic has signed a lease for 250,000 square feet in the former Slack headquarters at 500 Howard St., the Chronicle previously reported. Sources said landlord Heitman is expected to approve the sublease deal in the next two weeks. Anthropic and Heitman didn’t previously respond to Chronicle requests for comment.
A source who spoke on the condition of anonymity said that it is typical for office leases to include a “landlord consent period” of 30 days or more in the event that a tenant moves to sublease its space.
Both OpenAI and Anthropic have raised billions of dollars to hire new employees, expand their product development and grow their offices. Two weeks ago, Amazon invested $4 billion in Anthropic. In January, Microsoft announced a $10 billion investment into OpenAI.
OpenAI’s potential deal would be the city’s biggest since 2018, when Facebook (now Meta) leased 755,900 square feet at Park Tower in the largest single office lease in city history. Meta has since ditched its offices at nearby 181 Fremont, but just found a tenant for a small portion of the space in travel tech firm Navan. Pinterest signed a 490,000square-foot lease at 88 Bluxome St. in 2019 but canceled it in 2020.
OpenAI currently leases 40,000 square feet at 3180 18th St. and 100,000 square feet at 575 Florida St. in the Mission District. If the company ends up vacating these offices, that space will add to the city’s steadily growing inventory of empty space.
Experts expect vacancy to keep rising over the next year despite more than a half-dozen AI firms expanding in recent months.
“We still forecast (vacancy) to peak in late 2024. Expirations through next year are a big part of the issue as tenants are expected to take less space than they currently lease,” said Robert Sammons, senior research director at real estate brokerage Cushman & Wakefield, who isn’t involved in the OpenAI deal.
“Certainly, these AI deals are a big boost to the San Francisco market, but they alone won’t solve the high-vacancy issue,” he said. “That said, it will create positive momentum, which could cause other tech and non-tech tenants to reassess their space needs in the market.”