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 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.