The office vacancy rate in San Francisco climbed to 28.4% in May, following a 330-basis-point year-over-year increase — the highest among major U.S. markets, according to Yardi Matrix Research. Yet asking rents remain relatively strong: the average listing rate reached $63 per square foot, second only to Manhattan and well above the national average of $47.53. The likely explanation is a continued flight to quality, with demand concentrated in the newest and best office space. But as vacancies mount, city leaders are moving to respond.

For example, in late May, Mayor Daniel Lurie signed legislation to create a Downtown Revitalization Financing District designed to support conversions of underutilized offices into housing downtown. Preliminary analysis identifies approximately 1,200 eligible parcels spread across the central business district, including the Market Street corridor, Financial District, Union Square, Civic Center, East Cut, Rincon and Yerba Buena.

Of those eligible properties, around 49 have been identified as prime candidates, based on factors like age, size, condition and vacancy rate. Collectively, they’re capable of producing approximately 4,400 new residential units and generating around $15.5 million annually in tax revenue. The program is slated for Board of Supervisors review this fall and allows developers to opt in through 2032. It also offers up to 30 years of property‑tax increment payouts, funded by post‑conversion value increases.

Notably, San Francisco’s Adaptive Reuse Program, launched under former Mayor London Breed’s “30×30” plan, has already lowered barriers to conversion by waiving impact fees and transfer taxes, in addition to streamlining permitting. Despite these incentives, only one conversion was underway before the new financing model — the Humboldt Bank building (124 units). A second at the Warfield Building stalled due to financing issues.

Nevertheless, in 2025, a handful of initiatives have begun to gain traction: Namely, the planned partial conversion of 995 Market St. is introducing co‑living units into an existing 16‑story office tower. There’s also renewed developer interest in the former Wells Fargo headquarters at 333 Market St., which is now reportedly under contract.

In another sign of stability, in April, San Francisco mandated a return-to-office, four days per week schedule for all 34,000 municipal employees. Early data from Kastle Systems badge‑swipe reveals that regional office attendance has climbed above 40% in recent weeks