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
Market-wide R&D availability edged higher to 34.1% this quarter, up from 31.9% in the previous quarter. R&D vacancy also increased, reaching 31.0% compared with 29.4% over the same period. In contrast, market-wide industrial availability decreased to 6.6%, down from 7.2%, while industrial vacancy declined to 5.7% compared with 6.2% in the prior quarter. The region’s R&D pipeline currently includes 610,000 SF of product under construction, with 37.0% preleased. Industrial construction activity remains paused. Industrial and R&D posted $92.7 million in sales volume in the third quarter, down from $128.8 million in the prior quarter but up significantly from $30.5 million a year ago. Owner-users continued to be active, accounting for just over half of total trades