On a foggy San Francisco Monday, a couple of workers tap on laptops in an airy space akin to a five-star hotel lobby, with a fireplace and an abstract painting by artist Jimmy McCaffrey. Massages are on offer in the resort-like fitness center, and cocktails are available at a nearby speakeasy with a vinyl record collection.
The space isn't a hotel or high-end club; it's the new amenity floor at one of San Francisco's largest downtown office buildings.
The owners of the 39-story tower at 525 Market St. recently took the wraps off the $22.5 million renovation of a 29,000-square-foot space on the seventh floor that once functioned as offices for cosmetics giant Sephora. It's now dubbed the Cove, and it's the latest ambitious investment by office owners across the country looking to lure back tenants and workers after the pandemic emptied buildings and pushed the national vacancy rate to a current record high of 14%.
The situation has been more dire in downtown San Francisco, an area still saddled with millions of square feet of empty office space in its commercial center and a vacancy rate of nearly 23%. At a splashy cocktail party in late May to unveil the Cove, Mayor Daniel Lurie stopped by to help pump up the building as part of his overall recovery efforts for the region, as the newest and nicest offices show success in bringing workers back en masse.
Cushman & Wakefield broker J.D. Lumpkin, one of the leasing agents for 525 Market, likes to compare the Cove to going on vacation.
“If you can stay in a hotel that’s nicer than your own home, you'll do it every time," he said.
It's unclear whether the new features will draw in new leases and boost the tower to full occupancy. The building is already faring better than a few years back when it lost several tenants, however, with occupancy now hitting 80%, brokers note.
Amenity investment
The renovation began in 2022 as the owners of the building — the New York State Teachers Retirement System and DWS Group — faced a problem that was quickly becoming familiar to office landlords across the country. With about half of its leases set to expire, they began thinking about how to compete for tenants when companies simply didn’t need as much space.
“I remember going to the asset manager and saying, ‘OK, what are we going to do? We can’t just hope for the best,” Lumpkin said. By then, it had become clear that blue-chip tech companies that had formerly spent millions on lavish office quarters in downtown San Francisco skyscrapers were retreating, shrinking their office footprint by about half.
“Then you’re just forced to compete on price,” Lumpkin said. “It’s just about how cheap can you go?”
Seeking to avoid that fate, the owners kicked off a pricey bet on the Cove, named after the bayfront inlet that was beneath the tower during the 19th century before being filled in. The space takes up the entire seventh floor.
Employees can grab a coffee before work at the Cafe and Honesty Market, dip down for a board meeting catered by celebrity chef Wolfgang Puck, and finish the day at a decked-out game room or with cocktails with colleagues at the “vinyl” speakeasy. The private tenant lounge also touts a luxury fitness center with an infrared sauna, a $20,000 CryoLounge recovery chair, massage facilities and a podcast studio.
The owners are shelling out $2.3 million a year to staff the Cove with six full-time workers. The common areas, coworking spaces and meeting rooms are operated by the coworking firm Industrious.
The focus on amenities in office properties across the country comes as improvements in demand in some markets or in newer buildings haven't prevented the historic high vacancy, CoStar data shows.
Only about half of the 50 largest U.S. office markets have experienced more move-ins than move-outs so far in 2025, as first-quarter leasing trends saw companies taking spaces 15% to 20% smaller than the 2015 to 2019 average, according to a CoStar analysis.
In San Francisco, "while the leasing momentum has shifted, the market has yet to experience a meaningful reduction in the vacancy rate,” CoStar wrote.
Back to the office
The picture is quite a bit rosier for owners of trophy or so-called Class A+ buildings in major markets, which are exceeding 90% of pre-pandemic use on peak days, according to a midyear report from building security firm Kastle Systems.
Appealing amenities have grown in importance across the United States as major companies including Amazon, Boeing and JPMorgan Chase have called workers back to the office and want to keep them engaged in their workplaces. Employers see updated features as crucial to attracting top talent and getting them to want to come to the office in the face of post-pandemic hybrid work patterns, which have persisted, especially in the tech world.
By the 2010s, office landlords sought to replicate the amenities model pioneered in the early 2000s by tech giants such as Google, Erin Saven, real estate strategy director at architecture firm Gensler, previously told CoStar News. Nap pods, gourmet food and foosball began popping up in the workplace.
Recent studies have found that perks with a focus on health and wellness, food and beverages, outdoor spaces, and conferencing elements are still among the most in demand. In the current real estate climate, as tenants are spoiled for choices on where to sign new leases, they are flocking to properties that are either brand-new or upgraded with fancy amenities. The trend also speaks to the growing popularity of so-called third spaces, places where people can gather and socialize or work in venues other than their homes or offices.
Some of San Francisco’s premiere office properties are also among its most tricked out. Michael Shvo’s Transamerica Pyramid and PGIM and Barker Pacific Group's One Sansome have nabbed some of the larger leases executed in downtown post-pandemic, with AI company Databricks moving into One Sansome and global law firm Morgan Lewis taking space at the Transamerica Pyramid.
As for 525 Market St., which enjoyed being near fully leased for years before the pandemic, the building lost several big tenants to pandemic-related consolidation in recent years, including Sephora and Wells Fargo Bank. But it’s managed to lease new names to backfill that space; the building is about 80% leased, Lumpkin said.
Law firm Goodwin Proctor relocated from Three Embarcadero Center in January to take two floors, while IEQ Capital recently inked a lease to occupy a full floor. The building’s biggest tenant is Amazon, which occupies nearly 40% of its space. As of late last year, the tech giant requires most workers to come to the office five days a week.
At the Cove, the Wellness Studio features a full gym, a group fitness studio, massage guns, showers and changing rooms. Membership costs $35 per month, which employers can opt to pick up as a perk. Several staffers from Kinema Fitness are available for classes and personal training.
Lumpkin said the landlords expect the amenity floor to pay for itself within three years through gym memberships, food and beverage sales, and rental fees for the podcast studio and conference rooms.