SoMa Office Space: Where the Deals Still Pencil

The mood on the ground

Walk down Howard Street on a Tuesday morning, and you can see it in the length of the coffee lines and in the lack of “For Lease” banners that used to hang on SoMa buildings for years, because South of Market is back, and it came back fast enough that a lot of good tenants are getting left outside.

The numbers back up the mood, with San Francisco having leased 12.1 million square feet through Q3, up 77% from a year ago, while citywide asking rents just posted their largest quarterly jump since early 2020 and SoMa specifically, according to CBRE, has seen asking rents climb 32% year over year.

SoMA is not one market

Here is what brokers will tell you over a beer but rarely put in a report. While it is often missed in the headlines, SoMa is really three or four neighborhoods wearing one name, and the heat is concentrated in a few blocks while the rest of the district is still catching its breath.

East SoMa and the Howard corridor is where the big money landed, with Anthropic taking all of 300 and 342 Howard in a 484,000-square-foot, 13-year lease that effectively took anything walkable to Transbay off the table for everyone else.

Second Street’s brick-and-timber pocket is the startup zone, where the 1925 warehouse at 501 Second hit 98% occupancy after a run of AI leases from tenants who want exposed beams, big windows, and a short walk to Caltrain far more than they want a tower lobby.

Showplace Square has turned into a robotics and AI cluster almost overnight, with Together AI taking the top floors at 2 Henry Adams and availability there and in neighboring Mission Bay falling from 36.8% to 17.6% in under three years.

Office performance in SoMa depends on both building quality and location. Prime Class A buildings in the city’s strongest leasing pockets are attracting tenants, while Central and West SoMa, Yerba Buena, and Mid-Market continue to struggle. SoMa’s overall office vacancy rate was still 47% this spring, with much of the empty space concentrated in older Class B buildings. But 415 Natoma shows that quality alone does not guarantee demand: the new Class A tower reportedly went back to its lenders 97% empty, underscoring how a weaker pocket can lag even when other nearby submarkets are seeing strong leasing.

Where the banks will actually lend

Low office delinquency rates are helping bring regional banks and life companies back to the market, but their lending appetite follows the leasing heatmap. A stabilized building on Howard, Second, or in Showplace Square, backed by a creditworthy AI tenant on a long lease, may be bankable today, with lenders quoting debt yields of roughly 8.5% to 10%. But properties outside the strongest leasing areas, or with short rent rolls, are more likely to need bridge financing or may struggle to find a lender. The CIM buildings at 703 Market illustrate the risk: they entered special servicing on a $98 million loan after Unity left. Two entitled SoMa tower sites also received notices of default before construction began. For weaker assets, the 8.5% to 10% debt-yield range can be hard to reach, leaving debt funds as one of the few options.

A stabilized building on Howard, Second, or in Showplace Square with a credit AI tenant on a long lease is bankable today, with regional banks and life companies quoting again and underwriting to debt yields of roughly 8.5% to 10%, but miss that bar, and you are talking to a debt fund instead. The CIM buildings at 703 Market found that out when they landed in special servicing on a $98 million loan after Unity left; two entitled SoMa tower sites drew notices of default before a shovel ever hit the ground, and Class B space in Central or West SoMa with a short rent roll is bridge money or nothing at all.

If you are a tenant, the honest advice is to stop shopping SoMa as one neighborhood, because east of Fourth Street you are bidding against companies that pay $100-plus a foot without blinking, while west of it brick-and-timber still goes for a fraction of that in a building whose landlord would love your signature, and the longer walk to BART turns out to be a small price for a much better deal.

For SoMa office owners, the financing gap is increasingly tied to tenant quality and micro-location. Banks may lend on stabilized buildings leased to creditworthy AI tenants, while properties outside that profile can struggle to secure financing. That creates an opportunity for private lenders like us to bridge the gap as AI demand grows and leasing activity spreads to nearby buildings.

Sources: Cushman & Wakefield Q3 2026 MarketBeat, Savills via Allwork.Space, CBRE via The Registry, San Francisco Chronicle, The Real Deal, CoStar, Newmark Q1 2026 report, CRE Daily (Trepp data), Finance Lobby, Hoodline. Asking rents and vacancy figures are as of Q3 2026 and will change.