Bay Area CRE softness
Recent social commentary says Bay Area commercial sellers with 'strong hands' are shifting to sell, asking rents have roughly doubled while transactions have slowed, and West Coast industrial demand is cooling amid cost pressures ( ). The posts link rising rents and fewer sales to changing demand patterns from tech tenants and wider macro cost dynamics ( ).
Bay Area commercial real estate is splitting in two: leasing has picked up in parts of San Francisco, but sales and industrial demand remain uneven. (colliers.com) San Francisco office leasing hit 12 million square feet in 2025, the highest annual total since 2019, while overall vacancy fell to 30.4% in the fourth quarter and direct asking rents ended the year at $68.53 per square foot. (colliers.com) Cushman & Wakefield put San Francisco’s average asking rent even higher at $69.16 per square foot in the first quarter of 2026, up from $68.46 in the prior quarter, while its Bay Area investment report said sales over $10 million totaled about $6.8 billion in the first half of 2025, down 20.7% from the second half of 2024. (cushmanwakefield.com; cushmanwakefield.com) That mix helps explain the chatter around “softness.” Owners can still post firm rents on better buildings, but elevated interest rates and high vacancy are still weighing on deals, especially when buyers have to finance them. (cushmanwakefield.com; colliers.com) The tenant side has changed, too. Savills said San Francisco availability fell to 35.6% in the first quarter of 2025 as artificial intelligence and tech demand lifted leasing, while Colliers said 75% of leases in the third quarter of 2025 were for less than 10,000 square feet, a sign that much of the recovery was coming in smaller chunks rather than giant headquarters deals. (savills.us; colliers.com) On the sales side, some of the activity that did return came from stress, not strength. Avison Young said lenders were forcing more office sales in San Francisco in 2025 through note sales and foreclosures, including two deals above $100 million in the second quarter after years without one. (avisonyoung.us) Industrial real estate on the West Coast tells a different story from the pandemic boom. Cushman & Wakefield said nationwide industrial demand accelerated in 2025, but port-proximate markets captured just 13% of total demand that year, down from the historical 20% to 25% share, as maritime trade moderated and inland markets took more of the leasing. (cushmanwakefield.com) JLL said the United States industrial vacancy rate reached 7.5% in the fourth quarter of 2025, with 161.1 million square feet of net absorption for the year, while Colliers said some markets that saw rent growth above 35% in 2022 and 2023 were already seeing rent declines by early 2025. (jll.com; colliers.com) Even so, the West Coast is not moving in one direction everywhere. Colliers said the Inland Empire logged more than 14 million square feet of leasing in the first quarter of 2025, showing that large logistics hubs could still attract tenants even as tariff uncertainty and higher operating costs changed where demand showed up. (colliers.com) The result is a market where posted rents, actual deal volume, and buyer appetite are no longer moving together. In the Bay Area, 2025 and early 2026 data show leasing recovery in select office pockets, slower investment sales, and an industrial market that is cooling near the ports while demand shifts inland. (colliers.com; cushmanwakefield.com; cushmanwakefield.com)
