S.F. tech company expands its footprint as leasing surge lifts downtown office market

Databricks is doubling down in San Francisco, with the tech company expanding its office space at 1 Sansome St. by 90,000 square feet as the resurgent office market, now increasingly driven by artificial intelligence tenants, shows its strongest momentum in years.

The expansion comes about a year after Databricks committed to a long-term lease of 150,000 square feet in the Financial District tower, according to preliminary market data from the first few months of the year first provided by real estate brokerage CBRE.

Downtown office vacancy rates have hovered around 30% for years, a record high driven by the pandemic-era shift to remote work and a wave of sublease space flooding into the market as many companies downsize and reduce leasing activity in the city’s once-dominated tech industry.

Now, there are early signs of a shift: CBRE reports that the vacancy rate has declined slightly to 30.8% in the first quarter, a significant improvement from 33.5% in the final quarter of 2025. The number was driven by new demand, which the company quantified as tenants in the market seeking a total of 8.2 million square feet of office space.

There are still a lot of vacant offices and no one is taking them. However, things are looking up: So far in the first quarter, net absorption, a key measure of whether companies are taking up more space than they are giving back, has turned positive to more than 1.8 million square feet, according to CBRE. As the Chronicle has previously reported, this marks a sign of a market that has been mired in negative absorption for much of the past few years, as tenants downsize or exit offices entirely.

The company reported that about 3 million square feet of office space has been leased in recent months, with more than half occupied by AI tenants.

“The San Francisco office market recorded its highest quarterly net absorption in history,” said Colin Yasukochi, executive director of CBRE’s Technology Insights Center. “Vacancy rates fell two percentage points to 30.8% compared to the fourth quarter of 2025. Since demand turned positive in the fourth quarter of 2024, more than 4.4 million square feet of new occupation has occurred, the majority of which are AI tenants.”

Databricks’ expansion at 1 Sansome ranks among the top five leasing transactions of the quarter, bringing its total footprint in downtown San Francisco to approximately 240,000 square feet. The company is also expanding in Silicon Valley, having signed a separate 330,000-square-foot expansion project in Sunnyvale, according to a spokesperson.

The deal expands its footprint in the region to approximately 635,000 square feet and comes with strong business momentum, with the company reporting a revenue run rate of $5.4 billion at the end of January, up more than 65% year over year. The company has more than 10,000 employees in the Bay Area.

“We’re excited to double our footprint in the Bay Area, with significant increases in space in both San Francisco and Sunnyvale,” said Patrick Wendell, co-founder and vice president of engineering at Databricks, in a statement. “The rise of artificial intelligence has dramatically accelerated our business, and we’re excited to invest here to fund our continued growth.”

Other notable San Francisco leasing deals closing in the first phase of 2026 include artificial intelligence giant Anthropic taking over an entire 480-square-foot building at 300 Howard St., and OpenAI completing a long-awaited sublease deal at 1800 Owens St. in Mission Bay; Alassian renewing its existing lease for 125,000 square feet at 350 Bush Street; and Charles Schwab signing a $115,000 deal at 425 Market St. sq. ft. new lease.

In addition to these developments, rents in the city’s top office buildings appear to be rebounding. Yasukochi said 46 leases were signed in the first quarter of this year with rents of $100 per square foot or more, more than in all of 2025 and “the highest since at least 2015,” Yasukochi said. In January, real estate market players celebrated a record-breaking deal at Transamerica Pyramid, in which a 4,000-square-foot office was leased to a venture capital firm for more than $300 per square foot.

“As AI companies continue to grow and raise more capital, the office market is likely to remain in high demand, which will further reduce vacancy rates, increase rents, and potentially launch new developments over the next 12 months,” Yasukochi said.

This article was originally published on SF tech firm expands footprint as leasing surge boosts downtown office market.