The 32-year-old cornerback is in the final year of a three-year, $27.15 million deal and said the amount of pending free agents on the roster all but certainly makes him the odd man out.
"I've enjoyed my time," Sherman told NBC Sports Bay Area's Matt Maiocco. "I've loved every moment of it. And I wish we could continue it for a couple more years, but it's not looking likely."
Through 31 games with the Niners, Sherman has recorded four interceptions, one fumble recovery and 109 total tackles.
Among the players due for new contracts in San Francisco are left tackle Trent Williams, defensive end Solomon Thomas, fullback Kyle Juszczyk, wideout Kendrick Bourne, running back Jerick McKinnon, cornerback Dontae Johnson, center Ben Garland and defensive end Ezekiel Ansah.
Sherman, who earns upward of nine million per season, would likely be asked to take a pay cut to return.
"We've had brief conversations. I think that there's obviously a want from both sides to come back and make this work. Unfortunately, I don't know that the circumstances will allow it.
"That's the sad, sad truth. It's one of those years where it's not from anybody's fault that it may not work out. And it will be a sad parting because I've really enjoyed my time here. I've enjoyed this team. I have brothers on this team, and I think we still have work to do. But I don't know that the circumstances will allow it."
For his part, Sherman appears to be taking a pragmatic approach to the situation. With plenty of time still left in his career, the cornerback figures to find strong demand in free agency once again—even if he'd rather avoid the process and stay in San Francisco.
Sherman told Maiocco he's still thrilled to be with the franchise for now and is working to help push the team back to the playoffs once again.
What happens after that is purely a numbers game for general manager John Lynch.
"There are a ton of guys that need to be paid and are coming up," Sherman said. "Fred Warner is coming up. There are, like, 40 free agents who need to be re-signed. At the end of the day, they have to do what's best for the majority, for the team. And I got to understand that. And so the numbers are adding up to that I won't be here, unless something miraculous happens, which would be really cool."