Robotics and "Physical AI" Firms Drive Explosive Growth in Bay Area Office Leasing

JLL research shows robotics and drone companies have expanded their Bay Area presence by 1,400% since 2020, driven by the convergence of AI talent and hardware engineering.

By: AXL Media

Published: Apr 22, 2026, 4:57 AM EDT

Source: Bisnow

The Convergence of Talent and Space

The surge in leasing is driven by the necessity of proximity; to build effective autonomous systems, robotics engineers and AI software developers must work in close coordination. This has led to a distinct geographic split in leasing activity:

San Francisco (Flex/Office): Smaller "physical AI" firms are gravitating toward neighborhoods like Dogpatch, Mission Bay, and SoMa. Notable tenants include Chef Robotics (20,000 SF in Showplace Square) and Reflex Robotics (17,000 SF in SoMa).

South Bay & East Bay (R&D/Industrial): Large-scale production and heavy R&D are concentrated here. Figure AI recently opened a 98,700 SF campus in San Jose, while Tesla leased 375,000 SF in Fremont to accelerate its "Optimus" humanoid robot program.

Market Impact: A Turnaround for San Francisco Office

The voracious demand from AI and robotics companies has provided a significant tailwind for the struggling San Francisco office market. In the first quarter of 2026, AI-related deals helped drive 1.6 million square feet of positive net absorption the strongest quarter the city has seen in eight years. Overall vacancy dropped to 32.6%, while availability for Class-A space fell by 2.5%. For the first time since the pandemic, the city is seeing a "scarcity mindset" return to specific high-demand submarkets.