San Francisco offices are being quickly acquired by AI startups, leveraging Zoom exhaustion to attract top talent.

• In San Francisco, a growing number of early-stage startups are abandoning remote work and requiring employees to come to the office at least four days a week.
• Since 2016, the city's high vacancy rate and lowest lease prices have been exploited by companies.
• According to Alex Rosenberg, CEO of Tako, the visualization search engine startup, inventing something new is challenging when done remotely via Zoom.

At the beginning of 2024, Noah Jackson set out to find a new software engineering job and knew that office culture was the most important quality he wanted in his next employer.

Since the outbreak of Covid-19, Jackson, 27, has spent almost his entire professional career working remotely. Although many tech companies eventually transitioned to a hybrid work model, others abandoned their office spaces entirely. For Jackson, the majority of his work experience has been spent working from home in San Francisco or at his company's mostly empty office.

"I didn't realize how much work is truly a part of life until I left school," said Jackson, who previously worked at an enterprise software company. "Working remotely makes it feel like a task to be completed."

In May, Jackson received his desire to work at Tako, a visualization search engine startup that requires employees to visit the office four days a week. Tako is among a burgeoning group of early-stage tech companies in San Francisco striving to revert to the pre-Covid era, where startups took pride in their workspaces and minimized remote work.

"Tako CEO Alex Rosenberg stated that the company's goal is not to create a culture that suits everyone, but rather to make it work for Tako."

The growing remote work fatigue in San Francisco, where housing conditions are often cramped and where a high concentration of young, ambitious techies are eager to comingle, is reflected in the recruitment success enjoyed by Tako and its peers. This trend coincides with a boom in artificial intelligence that started after OpenAI's launch of ChatGPT in late 2022, an area where venture capital firms are showing an appetite for risk.

San Francisco's real estate market is becoming increasingly competitive, with emerging companies competing for office space deals after a period of high vacancy rates, according to Rosenberg.

Rosenberg, whose company is based in a co-working space in San Francisco's Pacific Heights neighborhood, stated that it is challenging to invent something new while working remotely via Zoom.

Tako has been searching for a larger workspace, specifically in the Hayes Valley area, known for its generative AI start-ups, or in downtown Jackson Square.

Despite the San Francisco office market remaining sluggish, with the vacancy rate increasing to 34.9% in the third quarter from 29.4% a year ago, Cushman & Wakefield reports that AI startups OpenAI and Sierra AI accounted for two of the largest leases in the period. The firm predicts that artificial intelligence companies will continue to be a major force in the San Francisco market, driving significant VC funding and leasing activity.

In 2023, tech accounted for 72% of all San Francisco office leasing, while through the third quarter of this year, it made up 58%.

Since the beginning of 2023, 62% of AI leases signed in the city have been for sublease space, indicating the market's adaptation since the pandemic. Instead of leasing entire floors to single companies, more offices are now being divided up to accommodate multiple startups, according to Hart.

'Screaming deal'

Since 2016, the lowest office rents have been observed across the city, according to Newmark's data.

Entrepreneurs who are just starting to scale may require more space than they realize and can obtain it at a discounted rate, according to Hart, who has been with the company for nearly 20 years.

The recovery of the broader market largely depends on the decisions made by significant tenants in San Francisco, such as and . While headquartered in Seattle, has recently announced a five-day in-office requirement, most of its tech competitors have not yet implemented such mandates.

Last year, Zach Tratar secured an ideal space for his company Embra through sheer hustle. He received a message from his broker about a promising location, and within 90 minutes, he arrived at the spot, beating another prospective lessee to the Salesforce Tower.

Tratar, whose company is developing an AI operating system, said, "I immediately thought, 'Great, I'll accept it. Please send me the paperwork immediately,'" and believes the office would have cost his company twice as much before the pandemic.

From the beginning, Tratar intended for employees to work in the office four days a week, with Wednesdays set aside for remote work.

""When one thing is going well, in-person teams have a magic to them and people get excited," Tratar said."

The app economy that emerged after the iPhone's launch in 2007 led to a surge in investment and an influx of new companies in San Francisco and Silicon Valley. This was preceded by the social networking boom and the internet bubble.

Hart stated that while there has been significant growth in the AI category, it is still in its early stages.

In today's world, companies must earn their employees' commutes to the office, as the pandemic has drastically altered expectations.

While catering to both those who drive and those who use public transit, startups should also consider the advantage of being located near restaurants and cafes.

Vivek Adarsh, CEO of AI startup Mithrl, announced that the company is providing employees with commuter benefits and free meals. Mithrl recently relocated to an office on San Francisco's Market Street in July.

Adarsh, along with his co-founder, established their company in San Francisco last year after completing their graduate studies at the University of California, Santa Barbara. They chose the city for its concentration of talent and because they are optimistic about its future, according to Adarsh.

""The city is seeing a surge in risk-taking behavior, with a lot of enthusiasm and energy," Adarsh stated."

Since its launch in 2022, Medra, a robotics startup located in the Mission district, has been present in person five days a week. CEO Michelle Lee stated that when she talks to her peers, many express a desire to switch to in-person work. However, she noted that persuading employees to abandon the hybrid model is challenging, as many prefer the current arrangement.

When companies make drastic changes, eroding trust is the result, according to work culture expert Y-Vonne Hutchinson.

As CEO of Superessence, Hutchison stated that physical offices offer advantages for younger employees seeking mentorship, growth, and career prospects.

During the pandemic, many individuals relocated, and companies adjusted to accommodate remote workers. Working in the office for four or five days, particularly in an expensive city like San Francisco, is challenging for parents, people with disabilities, and those with lengthy commutes.

Hutchinson stated that in-person interviews can significantly decrease the size of your hiring pool.

Although Lee acknowledges the difficulty of hiring talent from outside the region and her limitations in doing so, she stated that in-person interactions have been beneficial for her recruiting efforts.

In November 2023, Lee discovered a post on Hacker News by a senior engineer seeking in-person work culture. Upon reviewing her own qualifications, Lee was astonished. She deemed the post a "green flag" and promptly contacted the individual.

Within a month, the prospect had joined Medra.

""Hiring someone like this would have been challenging for us as a small startup, but it's also because we have some exceptional engineers who require in-person collaboration," Lee stated."

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