Bay Area commercial office vacancy rates saw a notable decline in Q2 2026, with San Francisco and Silicon Valley experiencing millions of square feet in positive net absorption, primarily fueled by large leasing commitments from AI and established tech companies.

A new wave of leasing activity, driven by artificial intelligence startups and established tech giants, led to a significant drop in Bay Area commercial office vacancy rates in the second quarter of 2026. This marks a notable reversal from the prolonged downturn that began during the pandemic, although the recovery remains concentrated in specific submarkets and high-quality assets.

San Francisco's office vacancy rate fell to 28.0% in Q2 2026, a 70-basis-point drop from the previous quarter and a 320-basis-point improvement from its Q2 2025 peak of 31.2%, according to Colliers. The city recorded 704,000 square feet of positive net absorption in Q2 alone, contributing to a year-to-date total of 2.1 million square feet—the highest first-half performance since 2018. Similarly, Silicon Valley saw its vacancy rate decline to 16.0% in Q2, down 60 basis points quarter-over-quarter and 170 basis points year-over-year. Kidder Mathews reported 863,400 square feet of net absorption for Silicon Valley in Q2, bringing the year-to-date absorption to 1.2 million square feet.

This rebound is largely attributed to substantial commitments from prominent tech and AI firms. In San Francisco, AI powerhouse Anthropic, which signed a 420,000 square foot lease at 300 Howard Street in January, later expanded its footprint with additional space at 500 and 405 Howard Street. OpenAI, another major AI player, reportedly expanded into nearly 1 million square feet across various locations, including Mountain View and Mission Bay. The Silicon Valley market saw legacy tech companies make some of the largest deals: Palo Alto Networks renewed a massive 909,616 square foot lease at 3333 Scott Blvd. in Santa Clara, while Advanced Micro Devices (AMD) renewed 313,906 square feet at 2485 & 2755 Augustine Drive, Santa Clara.

The recovery, however, is not uniform. Kidder Mathews research notes that "recovery remains concentrated in larger, high-conviction commitments rather than a broad return of smaller users." While positive, the overall market still grapples with elevated vacancy compared to pre-pandemic levels, and comprehensive data for the East Bay market for Q2 2026 is not yet publicly available from major commercial real estate firms. What remains to be seen is whether this concentrated rebound can broaden into a more widespread revitalization of the Bay Area's office landscape in the coming quarters.