North Peninsula Office Market
After three consecutive quarters of negative absorption, the region recorded positive absorption in the third quarter, closing at 123,267 SF. Gross absorption totaled 940,000 SF, a 32.0% increase quarter-over-quarter. Leasing volume from AI companies remained steady, comprising 10.5% of total new leasing volume, down from 13.3% in the prior quarter but on par with 10.0% one year ago. Market-wide vacancy increased to 21.1%, up from 20.6% in the prior quarter. Sublease vacancy decreased to 4.3%, compared with 4.9% during the same period. The total average asking rate ended the quarter higher at $6.21/SF full service, up from $6.14/SF in the prior quarter and $6.20/SF one year ago. At 2.5 million SF, active tenant requirements for the North Peninsula region are 17.5% above the 5-year quarterly average.
North Peninsula Industrial Market
Market-wide R&D availability rose to 31.9% this quarter, up from 29.6% in the previous quarter. R&D vacancy also increased, reaching 29.4%, compared to 28.5% over the same period. In contrast, market-wide industrial availability edged up to 7.2% from 7.0%, while industrial vacancy rose to 6.2%, compared to 5.4% in the prior quarter. The region’s R&D pipeline currently includes 1.7 million SF of product under construction, with 12.7% preleased. Industrial construction activity remains paused. Industrial and R&D posted the highest quarterly sales volume since Q3 2023, totaling $128.8 million in the second quarter, up significantly from $19.5 million in the previous quarter. Owner-users were notably active, accounting for just over half of total trades.