North Peninsula Office Market
The region recorded its third consecutive quarter of negative absorption, with 239,000 SF in the second quarter of 2025, driven primarily by a portion of Meta’s sublease in Burlingame being placed on the market. Omitting this sublease from the numbers would have resulted in positive net absorption of 148,000 SF for the quarter. Gross absorption totaled 711,000 SF, marking a modest 4.0% decline quarter-over-quarter. Leasing from AI companies surged this quarter, comprising 13.3% of total new leasing volume, up from 7.0% in the previous quarter and 1.3% one year ago. Market-wide vacancy increased to 20.6%, up from 19.5% in the prior quarter. Sublease vacancy edged up to 4.9%, compared with 4.0% over the same period. The total average asking rate closed the quarter at $6.14/SF Full Service, up from $6.02/SF in the prior quarter but down from $6.18/SF one year ago.
North Peninsula Industrial Market
Market-wide R&D availability rose to 29.6% this quarter, up from 27.5% in the previous quarter. R&D vacancy also increased, reaching 28.5%, compared to 25.3% in the same time frame. In contrast, market-wide industrial availability decreased to 7.0%, down from 7.5%, while industrial vacancy decreased to 5.4%, compared to 5.7% in the prior quarter. The region’s R&D pipeline currently includes 2.0 million SF of under construction product, with 11.0% preleased. Industrial construction activity remains inactive. Industrial and R&D sales volume fell to $19.5 million in the first quarter, marking a 57.7% quarter-over-quarter decrease and a 64.7% drop year-over-year.