Pedal to the Metal

Rental rates decline slowly, fighting strong resistance from building owners. Initially, the decline is choppy, led by the most desperate owners and those with a cost basis advantage, letting them get ahead of the falling knife and grab demand early. Eventually, though, the decline hits an inflection point. It becomes uniform. It accelerates. That's the fall.
 
The ride up is faster and far more unified, as everyone eagerly climbs aboard. There's no resistance, except when a tenant simply won't pay the price. But tenants don't hold that line the way landlords held theirs on the way down.
 
In this cycle, the recovery began with investors buying at fire sale pricing. Slowly, demand improved. As leasing volume increased, those early investors were rewarded for taking outsized risk. That pulled more investors back into the market, all while demand kept climbing. Top-tier assets were already benefiting from the flight to quality, but as the market improved, they really put their foot on the gas. Now, some 18 months into a stabilizing market, most landlords are raising rents.
 
These aren't incremental increases. The class A financial district building asking $75/sf for mid-rise space in 2025 is now likely priced in the mid-$80s. That's over 10% year-over-year growth. Landlords are pricing for where the market is going, not where it's been.
 
San Francisco landlords increasingly see a bright light at the end of the tunnel. They know the worst of a truly terrible period is behind them. Sure, people can speculate about the longevity of this cycle, how bankable the AI boom really is, and so on. But that's background noise. They've got space to lease and, for the first time in a long time, a steady flow of prospective tenants walking through the door.