Tech Metros Diverge: San Francisco Office Rebounds via AI While Seattle and Austin Stabilize
The geographic and structural bifurcation of the U.S. commercial office market has entered a new phase in Q2 2026.1 While national office vacancy remained largely flat, declining just 10 basis points in early 2026, tech-focused metros are seeing a pronounced stabilization and rebound. This recovery is directly fueled by artificial intelligence leasing activity, which has begun to establish a physical footprint large enough to reverse years of negative net absorption.
San Francisco’s Institutional Turnaround and AI Surge
The San Francisco office market closed Q2 2026 with a dramatic turnaround. According to CBRE, the city posted positive net absorption of 963,980 sq. ft. in Q2 2026, nearly reaching one million square feet of positive absorption in a single quarter. While the overall vacancy rate remains high at 29.2%, the influx of demand has stabilized average asking rates at $72.96 per sq. ft. on an annual, full-service gross basis.
This physical recovery is backed by a massive influx of institutional capital. A JLL Capital Markets report from early 2026 highlights that institutional capital now accounts for 60% to 70% of San Francisco office investment, a complete reversal from two years prior when private capital dominated 80% of transactions. Total investment volume jumped 140% year-over-year.
AI companies are the primary engine of this recovery. San Francisco recorded 143 AI-related lease transactions encompassing 2.0 million sq. ft. in 2025. By early 2026, active AI leases reached 260, covering over 7.5 million sq. ft. across the city—representing a 28% annualized growth rate since 2020.
Seattle and Bellevue Post Positive Net Absorption
The Seattle regional office market (including Seattle, Bellevue, and the surrounding Eastside) also turned a corner in Q2 2026, posting positive net absorption of 372,000 sq. ft. This marks the first time in four years that companies filled more space than they emptied.
According to JLL and GeekWire, technology companies accounted for 42.5% of all leasing during the quarter, with AI companies contributing 21.6% of year-to-date activity. The entire AI office footprint in the Seattle region has reached 855,000 sq. ft., doubling its 2024 level. Major transactions include Databricks signing a 142,000-sq.-ft. lease in Bellevue, DocuSign committing to 116,000 sq. ft. in downtown Seattle, and Pokémon occupying 369,800 sq. ft. in Bellevue. Overall regional vacancy remains elevated at 23.9%, but availability has compressed for two consecutive quarters.
Austin Eases Supply Pressures
In Austin, the massive supply glut of the pandemic era is finally being absorbed. CBRE's Q2 2026 figures show that Austin's office vacancy held flat quarter-over-quarter at 23.4%, representing a 110 basis point decline year-over-year. Year-to-date net absorption reached positive 324,000 sq. ft., a significant improvement over the negative absorption recorded during the same period in 2025.
The supply-side pressure has eased dramatically: Austin’s office construction pipeline contracted to 703,000 sq. ft., down more than 60% year-over-year. This reduction in speculative construction, combined with stable Class A demand, has allowed asking rents to rise 1.5% quarter-over-quarter and 3.5% year-over-year to $50.51 per sq. ft.
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An instance of Aggregate real estate averages collapse under the weight of localized technology capital. — It shows how localized AI-related leasing activity selectively stabilizes specific tech-hub central business districts while the broader national market remains highly depressed. ↩︎