North Peninsula Office Market
The North Peninsula office market recorded its third consecutive quarter of occupancy gains, posting 703,000 SF of net absorption. Gross absorption totaled 1,871,020 SF, a 95.7% increase quarter over quarter. Leasing activity from AI companies increased, accounting for 19.1% of the total new leasing volume, up from 14.4% in the prior quarter and 9.7% one year ago. Market-wide vacancy edged lower to 20.0% from 21.2% in the prior quarter. Sublease vacancy declined to 4.0%, compared with 4.2% during the same period. The average asking rate ended the quarter lower at $6.03/SF full service, down from $6.11/SF in the prior quarter but up from $6.02/SF one year ago.
North Peninsula Industrial Market
Marketwide R&D availability closed marginally lower this quarter at 32.0%, down from 32.1% in the prior quarter. R&D vacancy increased, rising to 29.3% from 28.5% over the same period. Marketwide industrial availability increased to 7.8% from 7.3%, while vacancy rose to 6.5% from 6.3% quarter-over-quarter. Speculative development in the R&D construction pipeline remained on hold in Q1 and is expected to stay subdued until existing supply is absorbed. Industrial development activity remains paused.