There is no end in sight for the troubled San Francisco office sector as the total availability rate increased by another 60 basis points to an all-time high of 32.7% in the first quarter of 2023, according to a new report from Savills. Additionally, available sublease space has jumped to 8.9 million square feet, compared to 7.7 million square feet a year ago.

Leasing activity was also down in Q1, totaling 0.9 million square feet, down from 1.4 million square feet last quarter while the overall asking rental rate declined $0.59 quarter-over-quarter to $70.64 per square foot. Savills’ Michael Soto said that continued economic uncertainty and the tech sector correction will likely cause tenants without near-term lease expirations to take a “wait-and-see” approach before transacting.

Savills also expects more office property distress in San Francisco for 2023. With worsening underlying market fundamentals and looming loan maturities, many owners are finding themselves underwater, and the firm predicts The City to remain tenant-favorable for the foreseeable future