North Peninsula Market Reports

North Peninsula Office Market

Flight to quality continues to be a sustained trend in the North Peninsula market, placing a higher demand on elite space, which in turn is keeping asking rents at a premium while also widening the gap in pricing between Class A space and commodity Class B and Class C space. As companies continue to offload portions of their real estate footprints and adjust to the evolving pandemic-related shift towards hybrid workplace strategies, a well-located highly-amenitized workplace is essential for attracting and retaining quality employees. Net effective rents continue to experience downward pressure due to generous concession packages throughout the Peninsula aimed at attracting and retaining tenancy. Market-wide vacancy increased to 11.2% this quarter, up from 10.4% in the previous quarter but down slightly from 11.5% one year ago. On the sublease front, vacancy counted for 2.7% of the total inventory and 24.5% of the total vacancy this quarter, compared to 2.4% of the total inventory and 23.0% of the total vacancy in the previous quarter. In addition to the growing amount of sublease space on the market, expiring subleases are contributing to the increasing amount of direct space available.

North Peninsula Industrial Market

Elevated interest in R&D, manufacturing and life science product continued to increase in the third quarter of 2022 across the Bay Area region as investors continued to pay top dollar for space, despite economic weakness and rising interest rates. The market-wide average R&D rate continued to increase in the third quarter of 2022, closing at $6.43/SF triple-net, representing a 4.2% increase from the previous quarter. R&D leasing activity this quarter was recorded at 809,108 square feet, compared with 817,994 square feet in the previous quarter.