North Peninsula Office Market
The North Peninsula office market recorded its second consecutive quarter of occupancy gains, posting 98,000 SF of net absorption. Gross absorption totaled 956,000 SF, a 2.0% increase quarter-over-quarter. Leasing activity from AI companies increased, accounting for 14.4% of total new leasing volume, up from 10.5% in the prior quarter and 2.3% one year ago. Market-wide vacancy edged up to 21.2% from 21.1% in the prior quarter. Sublease vacancy declined to 4.2%, compared with 4.3% during the same period. The average asking rate ended the quarter lower at $6.11/SF full service, down from $6.21/SF in the prior quarter and $6.13/SF one year ago.
North Peninsula Industrial Market
Marketwide R&D availability closed lower this quarter at 32.1%, down from 34.1% in the prior quarter. R&D vacancy also declined, falling to 28.5% from 31.0% over the same period. In contrast, marketwide industrial availability increased to 7.3%, up from 6.6%, while industrial vacancy rose to 6.3% from 5.7% in the prior quarter. The region’s R&D development pipeline bottomed out in the fourth quarter after delivering 4.3 MSF to the market over the past two years. Industrial construction activity remains paused.