When Noah Jackson started looking for a new job in software engineering in early 2024, he knew he wanted one quality in his next employer: the office culture.
Jackson, 27, has spent almost his entire professional career in the post-Covid world of remote work. While many tech companies eventually brought back employees on a hybrid basis, others cut their leases altogether. For Jackson, all but the first nine months of his first real job meant working from his San Francisco home or his company’s office, which was usually empty.
“When I left school, I overlooked how much work is actually part of your life and not just a box to check,” says Jackson, who previously worked at an enterprise software company. “Being completely remote, it feels like it’s something you have to do.”
In May, Jackson got his wish by taking a job at Tako, a visualization search engine startup that requires employees to come into the office four days a week. Tako is among a growing group of early-stage tech companies in San Francisco that are trying to return to the pre-Covid-19 days, when startups took pride in their own digs and limited their use of Zoom.
“We’re not trying to build a culture that works for everyone,” said Tako CEO Alex Rosenberg, who founded the company earlier this year. “We’re just trying to make it work for Tako.”
The recruiting success of Tako and his colleagues speaks to a growing fatigue with remote work, especially in San Francisco, where housing conditions are often cramped and where a high concentration of young, ambitious tech workers are eager to congregate. The changing landscape also coincides with an artificial intelligence boom that began after OpenAI launched ChatGPT in late 2022. It is one of the few areas where venture capital firms are showing an appetite for risk.
Rosenberg says he sees a much more competitive real estate market in San Francisco as emerging companies battle it out for deals on office space after a long period of high vacancy rates.
“If you’re trying to invent something new, it’s very difficult to do it over Zoom,” said Rosenberg, whose company no longer has coworking space in San Francisco’s Pacific Heights neighborhood, a few miles from the business districts in the downtown.
Tako was looking for a larger space, preferably in the Hayes Valley neighborhood, a hub for generative AI startups, or in downtown Jackson Square.
Overall, San Francisco’s office market remains tepid, with vacancies rising to 34.9% in the third quarter from 29.4% a year ago, data from Cushman & Wakefield shows. However, AI startups OpenAI and Sierra AI accounted for two of the largest leasing deals in the period, and the company said “artificial intelligence companies will continue to be a driving force in the San Francisco market, driving significant venture capital financing and leasing activity stimulated.”
According to Liz Hart, North American president of leasing at commercial real estate firm Newmark, technology made up 72% of all office leasing in San Francisco in 2023 and 58% in the third quarter of this year.
Since the start of 2023, 62% of AI leases signed in the city were for subleasing space, Hart said, an indication of how the market has adapted since the pandemic. Instead of leasing entire floors to individual companies, more offices are now being divided up to serve multiple startups, she said.
‘Screaming deal’
Still, office rents in the city are at their lowest level since 2016, according to Newmark data.
“If you talk to entrepreneurs who are just starting to scale, they’re probably taking on a little more space than they know they need and they’re getting a great deal for it,” says Hart, who joined the company nearly 20 years ago . .
How quickly the broader market recovers will largely depend on the decisions made by major San Francisco tenants like Salesforce and Google. While Seattle-headquartered Amazon recently announced a five-day in-office requirement, most of its tech rivals have yet to implement such mandates.
Zach Tratar was able to secure an ideal space for his company Embra last year through sheer hustle. When his broker messaged him about a promising location, Tratar showed up 90 minutes later and beat another potential tenant to the spot, at the Salesforce Tower.
“I immediately thought: ‘Cool, I’ll take it. Send me the paperwork right now,” says Tratar, whose company is building an AI operating system. He estimates that the office probably would have cost his company twice as much before the pandemic.
Tratar said his plan from the beginning was to have employees come into the office four days a week, with Wednesdays reserved for remote work.
“There’s something magical about personal teams,” Tratar said. “When something goes well, it adds energy to the system and people get excited.”
The AI renaissance has familiar qualities for Bay Area veterans. The app economy that followed the launch of the iPhone in 2007 led to a wave of investment and a flood of new companies in San Francisco and Silicon Valley. There was also the social networking boom and, before that, the Internet bubble.
“We’ve seen tremendous growth in the category, but we’re really just getting started,” Hart said of the current state of AI.
In today’s world, however, companies must monetize their employees’ commutes to the office, Hart said, because of how dramatically the pandemic has changed expectations.
Startups need to think carefully about access to public transportation while also taking into account people who drive. There is also an advantage in being close to restaurants and cafes.
AI startup Mithrl is offering employees commute and free meals, says CEO Vivek Adarsh. Mithrl moved to an office on San Francisco’s Market Street in July.
Adarsh started the company last year with his co-founder after completing graduate school at the University of California, Santa Barbara. The couple moved to San Francisco because of the core talent base and because they believe in the city’s future, Adarsh said.
“There is a lot of enthusiasm and energy,” Adarsh said. “People are taking more and more risks for the city.”
A few miles away in the Mission District, robotics startup Medra has been in-person five days a week since its launch in 2022. CEO Michelle Lee said that when she speaks to her colleagues, many tell her they are thinking about moving to human work, but that moving away from hybrid is a hard sell to employees who prefer the status quo.
Work culture expert Y-Vonne Hutchinson said that when companies make such drastic changes, “you erode trust.”
Hutchison is CEO of Superessence, whose AI tool allows companies to assess their culture. She said physical offices offer benefits to younger workers who may be looking for mentorship, growth and career opportunities.
There are limitations. Many people have moved during the pandemic and employers have started to cater to people who want to work completely remotely. Being in the office for four or five days, especially in an expensive city like San Francisco, is particularly tough for parents, people with disabilities and those who have long commutes.
“You reduce your workforce significantly if you do it in person,” Hutchinson says.
Lee recognizes the challenge and knows she is limited in her ability to hire talent from elsewhere in the country. But she said the personal contact ultimately helped with recruitment.
In November 2023, Lee visited the website Hacker News and saw a post from a senior engineer who said he was specifically looking for work for companies with a personal culture. Lee looked at his qualifications and said she was shocked. She called the post a “green flag” and immediately reached out.
Within a month the prospect had joined Medra.
“It would have been so hard for us as a company to hire someone like this because we are a small startup,” Lee said. “But part of it is that there are some really great engineers who are specifically looking personally because of that collaboration.”
