25% office vacancies, more tech layoffs and plummeting VC funding

San Francisco’s economy is being hit with a triple whammy that dims hopes of a lasting recovery: a glut of unused office space, accelerating tech layoffs and a drop in venture capital investment.

The city’s office sector has had one of its slowest quarters of the pandemic in the past three months, with the vacancy rate hitting a record high of 25.5% in late September, according to real estate brokerage CBRE. .

Rental activity totaled approximately 800,000 square feet, the lowest level in two years. The vacancy rate is more than six times higher than at the start of the pandemic, when it was 4%, and up from 20% a year ago, according to CBRE.

The market isn’t expected to rebound anytime soon: tech giants and smaller startups are trying to cut costs and close mostly empty offices, with Facebook’s parent company Meta and Google implementing a hiring freeze. Salesforce, Airbnb and Twilio all put San Francisco rental space up for sale in the third quarter, driving up the vacancy rate.

Venture capital funding in the United States, the engine of startup growth, fell nearly 40% to $43.3 billion in the third quarter from the second quarter, and the lowest level in more than two years.

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