San Francisco Is Back — But Only for AI Startups

1. Matt: SF's K-Shaped Recovery

Timestamp: 00:01:17 to 00:02:59 - watch this moment on skim

Matt explains that San Francisco's recovery is K-shaped, with high-growth tech and AI companies driving demand for top-tier office spaces, while older, less desirable buildings struggle. Last year saw 10 million square feet of leasing, the highest since the pandemic, signaling a return to a more normal leasing cycle, though there's still a long way to go. This divergence highlights the uneven nature of the city's economic rebound.

Significance (High): Understanding the K-shaped recovery is crucial for investors and businesses to target the right segments. It reveals where the real opportunities lie and where caution is advised.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

2. Demand for Premium Offices

Timestamp: 00:02:12 to 00:03:03 - watch this moment on skim

Companies are seeking high-end office spaces to attract employees back after the pandemic, according to Matt. These spaces feature natural light, views, and modern amenities, making them competitive with the work-from-home experience. This demand concentrates activity in the top 10-15% of the market, leading to increased tour activity and a return to pre-pandemic levels of interest. The focus on quality reflects a shift in how companies view the office space.

Significance (Medium): This trend reshapes office design and location choices. Companies must invest in attractive spaces to compete for talent, driving up demand for premium properties.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

3. Dasha: AI Driving Demand

Timestamp: 00:04:39 to 00:05:12 - watch this moment on skim

Dasha and Matt discuss how AI companies are rapidly expanding and seeking larger office spaces, with some growing from 5,000 to 300,000 square feet in just a few years. This growth surpasses even the dot-com boom era, indicating a significant shift in demand dynamics. The rapid expansion of AI firms is reshaping the landscape of San Francisco's commercial real estate market.

Significance (High): AI's impact on real estate is undeniable. Investors and developers must cater to the unique needs of these fast-growing companies to capitalize on this trend.

Sources in support: Dasha (Host), Matt (Senior Vice President at CBRE)

4. Matt on Current Office Prices

Timestamp: 00:05:15 to 00:06:03 - watch this moment on skim

Matt notes that the citywide average asking rent is around $70 per square foot, a 15-25% discount from pre-pandemic levels of $80-95. Landlords are also offering concessions like tenant improvement dollars and free rent, further reducing effective rents. This makes it a favorable time for tenants to secure leases, especially those comfortable with long-term growth. The current market presents a unique opportunity for businesses.

Significance (Medium): Tenants can leverage discounted rents and concessions to secure favorable deals. This creates opportunities for growth and investment in office spaces.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

5. Skipping Coworking Spaces

Timestamp: 00:10:44 to 00:11:32 - watch this moment on skim

Founders are increasingly skipping co-working spaces in favor of renting their own offices early on, according to Matt. This is driven by faster company growth and a desire for brand identity. Renting a dedicated office space provides a sense of legitimacy and makes recruiting easier, especially when aiming to create a strong company culture. The need for a distinct brand presence is outweighing the flexibility of co-working.

Significance (Medium): This trend challenges the co-working model. Startups prioritize brand and culture, leading them to invest in dedicated spaces sooner rather than later.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

6. Matt: In-Person Collaboration

Timestamp: 00:12:45 to 00:13:35 - watch this moment on skim

Matt argues that in-person collaboration is essential for building and innovating, as it's difficult to replace centuries of human behavior with remote work. The ability to quickly tap someone on the shoulder or yell across the office speeds up the pace of work. While remote tools have their place, they cannot fully replicate the benefits of in-person interaction. The value of physical presence remains paramount.

Significance (Medium): This reinforces the importance of physical offices for fostering innovation and culture. Companies must balance remote flexibility with the benefits of in-person collaboration.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

7. Underestimating the Leasing Process

Timestamp: 00:14:56 to 00:15:41 - watch this moment on skim

Founders often underestimate the time required to secure an office space, according to Matt. The process typically takes two to three months due to negotiations and legal procedures. Rushing the process can lead to unfavorable terms, so it's crucial to allow ample time for surveying the market and making informed decisions. Patience and planning are key to securing the right space.

Significance (Medium): Founders must plan ahead and allocate sufficient time for the leasing process. This ensures they can secure the best possible terms and avoid costly mistakes.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

8. Matt on the Modern Office

Timestamp: 00:16:50 to 00:18:07 - watch this moment on skim

Matt explains that modern offices require fewer desks and more collaboration areas, both formal and informal, to compete with the work-from-home experience. The office should feel like a home, with multiple areas for people to work, and lean into hospitality with good coffee and meals. Event spaces are also increasingly important. The office is evolving into a multi-functional hub.

Significance (Medium): Office design must adapt to changing employee needs. Creating a comfortable, collaborative, and functional space is essential for attracting and retaining talent.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

9. Union Square: An Underrated Option

Timestamp: 00:23:14 to 00:24:11 - watch this moment on skim

Matt suggests that Union Square is an underrated area for startups, offering affordable options and charming buildings. It's a buzzy area with good nightlife and a police command post, making it one of the safest areas in the city. The area also boasts convenient amenities like restaurants, shops, and hotels. Union Square presents a compelling alternative to more traditional tech hubs.

Significance (Medium): Startups should consider Union Square for its affordability and convenience. It offers a unique blend of amenities and safety, making it an attractive location.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

10. Matt's Advice for First-Time Founders

Timestamp: 00:25:19 to 00:26:15 - watch this moment on skim

Matt advises first-time founders to schedule a meeting with a real estate expert to diagnose their needs. He emphasizes the importance of considering headcount projections and how the company envisions itself working. By asking leading questions, experts can translate these needs into real estate terms and present suitable options. Seeking expert guidance is crucial for navigating the complex real estate market. The right expert can illuminate the path forward.

Significance (Medium): First-time founders should seek expert advice to navigate the complexities of the real estate market. This ensures they make informed decisions and secure the right space for their needs.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

11. Matt: Flexibility Over Size

Timestamp: 00:33:18 to 00:33:56 - watch this moment on skim

Matt advises startups to prioritize layout and flexibility over square footage when choosing an office space. He emphasizes the importance of finding a space with a short enough lease term to allow for growth. Startups should avoid locking themselves into long-term leases when they are still in growth mode. Adaptability is key to navigating the uncertainties of a growing business.

Significance (Medium): Startups should prioritize flexibility and adaptability in their office space choices. This allows them to scale their operations without being constrained by long-term leases.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

12. Subleases as a Strategic Advantage

Timestamp: 00:34:14 to 00:34:55 - watch this moment on skim

Matt highlights the benefits of subleases, where companies take over existing leases with furniture and cabling already in place. This reduces upfront capital expenditure and provides shorter lease terms. Subleases offer a plug-and-play solution for companies looking to move quickly and save money. The sublease market provides a strategic advantage for cost-conscious startups.

Significance (Medium): Startups should explore sublease options to reduce costs and secure shorter lease terms. This allows them to conserve capital and maintain flexibility.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

13. Matt: SF Market Outlook

Timestamp: 00:36:25 to 00:37:14 - watch this moment on skim

Matt suggests that San Francisco is in the early innings of a rebound, with rents up and vacancies down. He believes that so long as AI continues to grow, the market will continue to improve. Founders should feel lucky to be part of this next wave and take advantage of the optionality available today. The future looks bright for San Francisco's commercial real estate market.

Significance (Medium): Founders should be optimistic about the future of San Francisco's commercial real estate market. The city is poised for continued growth, offering unique opportunities for businesses.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

14. Locking in Rents in 2026

Timestamp: 00:38:21 to 00:39:07 - watch this moment on skim

Matt suggests that 2026 may be a good time to lock in rents, as they are expected to increase in the future. He notes that companies comfortable with their growth trajectory are already considering longer-term leases to secure today's prices. Acting sooner rather than later could save money and secure quality options. The window of opportunity is closing.

Significance (Medium): Companies should consider locking in rents in 2026 to avoid future price increases. This requires careful planning and a clear understanding of their growth trajectory.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

15. Matt on Compromises

Timestamp: 00:39:50 to 00:40:48 - watch this moment on skim

Matt explains that budget is the biggest refiner of scope when startups are looking for office space. He suggests that the inventory will tell you what you need to compromise on. This could include lease term, location, or amenities. Flexibility and adaptability are key to finding the right space within budget. The market dictates the terms of the deal.

Significance (Medium): Startups must be prepared to compromise on certain aspects of their office space to stay within budget. This requires a clear understanding of their priorities and a willingness to adapt.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

16. Matt: SF Still #1

Timestamp: 00:41:50 to 00:41:58 - watch this moment on skim

Matt firmly believes that San Francisco is still the number one city to build a startup. Despite its high costs, the city offers unparalleled access to culture, ideas, capital, and customers. The unique ecosystem of San Francisco continues to attract and foster innovation. The city remains the epicenter of the startup world.

Significance (High): San Francisco remains a top destination for startups. Its unique ecosystem and access to resources outweigh the high costs.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

17. Matt: Office as Culture Engine

Timestamp: 00:41:55 to 00:42:19 - watch this moment on skim

Matt emphasizes that the office is a cultural center, not just a cost center. San Francisco has always been one of the most expensive cities for labor and real estate, yet companies still want to be there for culture, idea sharing, access to capital, and access to customers. The office fosters collaboration and innovation. The physical space is integral to the company's identity.

Significance (Medium): The office plays a crucial role in fostering culture and innovation. Companies should invest in creating a space that promotes collaboration and idea sharing.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

18. Construction Prices: The Disconnect

Timestamp: 00:42:36 to 00:43:05 - watch this moment on skim

Matt identifies construction prices as the biggest disconnect in the market today. San Francisco has the most expensive construction market in the country, preventing landlords from renovating vacant spaces. This creates a surplus of less desirable spaces that tenants are unwilling to invest in. High construction costs are hindering market recovery.

Significance (Medium): High construction costs are a major obstacle to market recovery. Addressing this issue is crucial for unlocking the potential of vacant spaces.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

19. Matt: Stop Optimizing for Size

Timestamp: 00:43:11 to 00:43:33 - watch this moment on skim

Matt advises founders to stop optimizing for square footage and instead focus on layout and flexibility. He emphasizes the importance of creating a space that is functional and adaptable to the company's needs. Prioritizing design over size can lead to a more efficient and productive workspace. The key is to maximize the use of available space.

Significance (Medium): Founders should prioritize layout and flexibility over square footage. This ensures they create a functional and adaptable workspace that meets their needs.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

20. Matt on Office Perks

Timestamp: 00:44:39 to 00:45:16 - watch this moment on skim

Matt believes that functionality is more important than perks in 2026. He emphasizes the importance of having multiple places for people to sit down and work, such as high tables, couches, and desks. The optionality of places for people to work is a perk that people are passionate about. The focus should be on creating a versatile and comfortable workspace.

Significance (Medium): Companies should prioritize functionality and versatility over traditional perks. Creating a comfortable and adaptable workspace is essential for attracting and retaining talent.

Sources in support: Matt (Senior Vice President at CBRE)

Neutral sources: Dasha (Host)

CBRE's Market Position (Medium severity)

Type: Commercial

Matt's affiliation with CBRE, a major commercial real estate firm, creates a commercial interest in promoting a positive outlook on the San Francisco office market. CBRE benefits directly from increased leasing activity and higher property values.

Significance: This raises questions about whether Matt's analysis is fully objective or if it's influenced by CBRE's financial stake in the market's success. The audience is left to wonder if less favorable data points are being downplayed.