Earlier this year at an event in San Francisco, OpenAI CEO Sam Altman dismissed the idea that fully remote work could replace the value of in-office collaboration. This week, his surging company signed the largest office lease seen in the city since 2018.

In a period of doom and gloom for the commercial real estate sector, hammered by remote work and high vacancy rates in cities across the U.S., the deal offers a dose of hope. And for San Francisco, whose struggles with crime and homelessness have been well documented, it adds to a growing presence of companies involved in the burgeoning field of artificial intelligence.

Since kickstarting the AI boom with the release of ChatGPT last year, OpenAI has quickly become one the world’s most valuable closely held companies. Bloomberg reported earlier this month that OpenAI is in talks to sell shares an $86 billion valuation, and it reported in August that the company is on track to generate $1 billion in annual revenue.

OpenAI is leasing two buildings from Uber, which is “right-sizing” its real estate usage, at the ride-hailing company’s headquarters campus in the Mission Bay neighborhood. An Uber spokesperson confirmed to Fortune that the deal had finally closed. (Since it’s a sublease, landlords had to give their consent, which meant longer negotiations.) OpenAI is taking 486,600 square feet in all in the four-building campus.

As the Wall Street Journal reported earlier this month, office attendance in large cities is still only about half the level seen in 2019. That’s despite a slight uptick recently and tough talk from high-profile CEOs about enforcing return-to-office policies.

As for San Francisco, it notched a record-high 33.9% office vacancy rate—nearly 30 million square feet listed for lease or sublease—in the third quarter, as reported by the San Francisco Chronicle. The paper noted that about 150,000 workers could fill all the empty office space.

The lack of all those employees hurts local businesses, including retailers and restaurants. That combined with the crime problem has prompted companies to give up on the city. In August, one of the city’s flagship retailers, Nordstrom, closed its once-vibrant store.

Story continues

As the owner of the mall that Nordstrom inhabited noted, “A growing number of retailers and businesses are leaving the area due to the unsafe conditions for customers, retailers, and employees, coupled with the fact that these significant issues are preventing an economic recovery of the area.”

The city’s “doom spiral” fears continue, but the move by OpenAI provides a bit of hope. And it helps that this year other AI firms have also leased office space in San Francisco.

As the Chronicle reported, Hive AI leased 57,117 square feet in a downtown skyscraper next to Salesforce Tower. Hayden AI leased 41,196 square feet, Anthropic leased 17,735, and Tome AI 16,887. (On Friday, Google said that it’s agreed to invest up to $2 billion in Anthropic, following Amazon saying it will invest up to $4 billion.)

That means five AI companies, including OpenAI, are leasing nearly 620,000 square feet of office space in the city. Of course, that’s still a drop in the bucket compared to amount of vacant space.

“There’s definitely a lot of hope and optimism that [AI] could be the catalyst for the next growth cycle not only for the office market, but for the San Francisco economy,” Colin Yasukochi, executive director of CBRE’s Tech Insights Center, told the Chronicle. But it could be years before “we see this growth cycle really explode,” if it does at all, he noted.

As it turns out, OpenAI’s office deal closed just as another San Francisco tech company ended a return-to-office experiment. Expensify, with a market cap of about $215 million, said this week that it’s closing an upscale office lounge where employees could enjoy champagne or a draft beer while collaborating in a restaurant-style booth or working on laptops at the bar.

In a blog post this week, Expensify CEO David Barrett described the lounge as an experiment on luring employees back into the office, and he concluded that remote work had won. “We’re just never going back to a regular nine-to-five office culture, a staple of not just our modern culture, but also the foundation of most urban planning,” he wrote.

For his part, OpenAI’s Altman—who has become a household name in the tech world and perhaps beyond—stressed the need for in-person collaboration and noted the shortcomings of remote work during a Stripe conference in San Francisco earlier this year.

“I think definitely one of the tech industry’s worst mistakes in a long time was that everybody could go full remote forever, and startups didn’t need to be together in person and, you know, there was going to be no loss of creativity,” he told attendees. “I would say that the experiment on that is over, and the technology is not yet good enough that people can be full remote forever, particularly on startups.”

OpenAI did not immediately reply to Fortune’s request for comments.

This story was originally featured on Fortune.com

The post OpenAI seals deal for San Francisco workplace house after CEO Sam Altman calls distant work ‘experiment’ one in every of tech trade’s worst errors appeared first on DAILY SAN FRANCISCO BAY NEWS.

OpenAI is moving into a pair of San Francisco buildings that once housed Uber workers after its founder Sam Altman called a remote work experiment one of the tech industry’s worst mistakes.

Earlier this week the company signed a lease on two buildings owned by Uber, securing 486,600 square feet, Fortune reported Saturday.

In May, Altman said the flirtation with working from home is “over,” and said that startups like his are most efficient when people work together from an office, according to Fortune.

(Research on remote work is so far inconclusive on the efficiency and productivity or remote workers.)

Sam Altman is leasing office space for OpenAI in San Francisco months after he said workers are more efficient when they work together in person.Jack Guez/AFP via Getty Images

The lease is the second largest in San Francisco since 2018 and comes at a time when work-from-home trends have emptied out office buildings in the West Coast city.

The office vacancy rate in the City by the Bay is still more than 33%, according to the San Francisco Chronicle.

Businesses have closed in once-thriving San Francisco neighborhoods, and certain types of property crime have skyrocketed in recent years, even as the city is statistically safer than major cities like Houston and Seattle.

The cycle of rising property crime and shuttered restaurants and retail stores have created worries about a downward economic spiral.

Now the city’s landlords are looking to the burgeoning AI industry to bail them out.

Companies like Adept AI, which recently leased 35,000 square feet of space in a former recycling facility, are moving to San Francisco.

Landlords are even offering incentives to entice artificial intelligence companies to the city, which was once known as a tech hub.

It remains to be seen if AI companies can revitalize California’s fourth-largest city.

The post OpenAI Leases San Francisco Workplace Area Because the Metropolis Seems to Woo AI Corporations appeared first on DAILY SAN FRANCISCO BAY NEWS.

A closely watched lease deal between a ride-hailing behemoth and a fast-growing company that is at the forefront of San Francisco’s burgeoning artificial intelligence boom has made it over the finish line.

A spokesperson for Uber confirmed on Thursday that it has leased two of four buildings that make up its Mission Bay headquarters campus to OpenAI, the maker of ChatGPT and DALL-E 2. 

In a market where few new leases — particularly for large blocks of space — have been signed in the wake of the pandemic, the sublease deal is one of the most significant transactions to have closed in recent years. 

“We are glad that in a competitive office real estate market, our employee-friendly, award-winning and sustainable buildings clearly stood out,” Uber’s spokesperson told the Chronicle. “By right-sizing our space needs we can bring our teams closer together, exercise rigorous cost management, and bring more foot traffic to the businesses of Mission Bay. This is a win-win-win.”

The spokesperson confirmed that OpenAI will be moving into 1455 and 1515 Third St., taking a total of 486,600 square feet. That’s about 40,000 square feet more than the company was reported to be in negotiations for earlier this month.

Uber’s spokesperson said that the company will continue to occupy the two other buildings on its campus, located at 1655 and 1725 Third St. The company will shift its focus to expanding its other campus in Silicon Valley.

“The remaining buildings contain more than enough capacity for current Uber employees in San Francisco, with sufficient room to grow, and we also plan to also expand our Sunnyvale campus,” the spokesperson said. 

OpenAI has leased space in Uber’s headquarters on Third Street in San Francisco.

Santiago Mejia/The Chronicle

The lease transaction was facilitated by Raise Commercial Real Estate and Paul Hastings.

OpenAI currently leases 40,000 square feet at 3180 18th St. and 100,000 square feet at 575 Florida St. in the Mission District. The company confirmed on Thursday that it plans to maintain a presence in the neighborhood, but did not confirm whether it would hold on to both offices. 

“We are leasing two buildings from Uber in Mission Bay, which will provide the space needed for our growing team,” said OpenAI spokesperson Hannah Wong. “We’re thrilled to continue scaling our company in San Francisco.”

The deal is a boon to San Francisco’s beleaguered office market, which according to real estate services firm CBRE recorded a 34.7% vacancy rate in the third quarter.

And while AI deals alone won’t solve the issue of high vacancy, real estate stakeholders are banking on it sparking more positive momentum in terms of leasing.

Mayor London Breed on Thursday applauded the transaction. 

“OpenAI is at the forefront of an industry that is transforming the world, and I am proud they are expanding right here in San Francisco where they first started,” Breed said. “This major investment and commitment to our city sends a message that this city is the place to be if you want to be a part of what’s next.”

Multiple sources confirmed Thursday that another AI deal that has been in the works in recent months was signed this week: Anthropic has reportedly transacted on its bid to lease 250,000 square feet in the former Slack headquarters at 500 Howard St. 

Slack owner Salesforce is an investor in Anthropic, which seeks to build more ethical AI tools. The company, which is currently located at 548 Market St., could not immediately be reached Thursday. 

Because both deals — OpenAI and Anthropic — involved sublease space, the landlords of Uber’s campus and Slack’s headquarters had to give their consent, which prolonged negotiations.

Other AI firms, including Hive AI, Hayden AI and Tome AI, signed San Francisco office leases over the summer.

Reach Laura Waxmann: laura.waxmann@sfchronicle.com

The post OpenAI closes massive lease deal at Uber’s San Francisco headquarters appeared first on DAILY SAN FRANCISCO BAY NEWS.