Silicon Valley Office Market
|Average FS Asking Rent (Price/SF) ||$4.77|
|Availability Rate (%)||12.9%|
|Net Absorption (SF)||-725,039|
Silicon Valley’s office market saw its seventh consecutive quarter of negative net absorption in the second quarter of 2021, with -725,039 square feet of net absorption. Comparatively, the first quarter ended at -630,456 square feet, and second-quarter 2020 was -825,962 square feet. The year-to-date net absorption now stands at -1.4 million square feet. Leasing velocity has rebounded to pre-pandemic levels with over 1.8 million square feet of gross absorption, which is the highest gross absorption since third-quarter 2019. Overall sublease space continued to increase this quarter to 3.0 million square feet, which is up from roughly 2.6 million square feet at the end of the first quarter.
Silicon Valley R&D Market
|Average NNN Asking Rent (Price/SF)||$2.45|
|Availability Rate (%)||12.6%|
|Net Absorption (SF)||-176,212|
The 4th of July fireworks were a fitting end to an explosive quarter for the R&D market, with leasing levels returning to pre-pandemic levels of activity and absorption. Net absorption posted negative 176,212 square feet, which is the lowest net loss since the fourth quarter of 2019’s negative 127,292 square feet. Gross absorption was robust, with approximately 2.4 million square feet, which is the highest gross absorption has been since fourth-quarter 2019. The vacancy rate ended at 12.6%, which is down from 12.9% last quarter, but up from 11.0% just one year ago. Asking rates on a monthly triple-net basis decreased to $2.45/SF from last quarter’s historic high of $2.54/SF. The decrease is due to 28 new listings over 10,000 square feet coming to the market, 16 of those being subleases.
Silicon Valley Industrial/Warehouse Market
|Average NNN Asking Rent (Price/SF) || $1.14|
|Availability Rate (%)|
|Net Absorption (SF)|
The industrial market continued gaining momentum during the second quarter of 2021. Overall industrial performed strongly throughout the pandemic, and current activity indicates this growth trend will continue. Prior to the pandemic, the market was already extremely tight with near-historic low vacancy and historic high asking rates. Warehouse outperformed general industrial once again, but general industrial did post improved numbers this quarter. Combined industrial and warehouse was the strength of the market during the pandemic, and current momentum bodes well for future growth.
|Average NNN Asking Rent (Price/SF)||$1.06|
|Availability Rate (%)||7.26%|
|Net Absorption (SF)||199,474|
The warehouse market also ended the year in an encouraging way, with the second positive net absorption in a row, with 199,474 square feet. Fremont was the sole submarket with a negative net absorption this quarter, at 20,948 square feet. Asking rates jumped up $0.03/SF to $1.06/SF, a historic high for Silicon Valley. Vacancy rates in the warehouse market also dropped down to 7.26%, the lowest vacancy for the warehouse market in Silicon Valley since 2018.