Silicon Valley Real Estate Market Reports

Silicon Valley Office Market

The Silicon Valley market showed signs of recovery in the fourth quarter, with positive net absorption of 1.1 million square feet (MSF), reversing the previous quarter’s negative net absorption of -486,000 square feet. This improvement, alongside vacancy rate decreases from 20.1% to 19.5%, signaled that market stabilization is gaining momentum. Overall vacancy decreased to 19.5% in the fourth quarter of 2024, driven by a reduction in both direct and sublease availability. Sublease availability dropped to 4.7 MSF from 4.9 MSF in the third quarter of 2024, and direct space availability decreased to 15.2 MSF. Asking rents decreased to $5.00/SF full service at the end of 2024, down from $5.10/SF full service from the prior year, indicating market adjustments toward landlord pricing. Effective rents continue to be influenced by high concessions, such as free rent. Companies continue to prioritize amenities such as flexible workspaces, larger conference areas, ample natural light, and state-of-the-art infrastructure to attract employees back to the office

Silicon Valley R&D Market

Vacancy continued to tick up, recording 12.7% in the fourth quarter, and increasing 20 basis points from the previous quarter. Despite eight previous quarters of consecutive vacancy rate increases, overall vacancy remains below the long-term average vacancy of 13.9%. Asking rent growth in Sunnyvale, San Jose, and Milpitas was not enough to maintain marketwide positive rental growth in terms of year-over-year percent change. Overall, the average asking rent decreased -2.8% year-over-year to $2.88/SF on a NNN basis. Sunnyvale led the South Bay with a 6.3% year-over-year gain to $3.60/SF on a NNN basis, while San Jose and Milpitas also posted growth of 1.3% and 1.9%, respectively. Sunnyvale’s incremental year-over-year gain can be attributed to 24,000 square feet of availability added at 1320 Kifer Road in Sunnyvale.

Silicon Valley Industrial Market

Inflated levels of sublease and direct space on the market pushed the Silicon Valley combined industrial and warehouse vacancy rate up to 5.8% in the fourth quarter of 2024, up 187 bps from year-end 2023. Despite the increases, vacancy remains below the 20-year historic average of 6.0%. Overall market asking rents increased by 7.6% from the same period as last year to $1.54 per square foot NNN, with rent growth recording the highest at 35.5% in the San Jose submarket. Sunnyvale also posted strong rent growth of 27.9% during the year. While asking rents are inching up, concessions, in the form of TIs and free rent, continue to be a large part of the lease negotiation so it is likely that effective rents are to remain flat.