Silicon Valley Office Market
The Silicon Valley office market showed signs of recovery in Q2 2025, recording 1.2 million square feet of positive net absorption, the third consecutive quarter of growth following Q4’s positive 1.1 million SF, and the highest level of net absorption since Q4 2018. Overall vacancy recorded 18.5%, a 110-basis point decrease from 19.6% in the previous quarter. Tenant demand increased, with active tenants in the market rising 45.5% since Q1 2025. Positive signs are emerging, as demand levels are up 104.3% year-over-year compared to Q2 2025, indicating strong tenant demand and improving confidence. Asking rents decreased to $5.06 per square foot full service in the second quarter of 2025, down 1.75% from the previous quarter, reflecting market adjustments to pricing.
Silicon Valley R&D Market
Vacancy rose from 12.5% in Q2 2024 to 13.9% this quarter, bringing the 2025 year-to-date average to 13.5%. The split between direct and sublease vacancy continued, with direct vacancy up 60 bps and sublease down 25 bps. R&D vacancy remained just below the 14.3% historical average. After years of steady growth, Silicon Valley R&D rents fell 3.7% year-over-year but remained elevated, up 7.1% from Q2 2023 and 19.8% from Q2 2022. Mountain View stood out amid the slowdown, with Shoreline maintaining the Valley’s highest asking rents, driven by its prime location, amenities, and infrastructure. Silicon Valley’s R&D sector recorded 2.2 million SF of absorption in Q2 2025, up 5.8% from the average. Overall new leasing was quiet, with no direct transactions over 100,000 SF, though renewals dominated. Demand for infrastructure-ready space continues to support sector stability.
Silicon Valley Industrial Market
The vacancy rate continued to rise, marking the seventh consecutive quarter of rising vacancy rates. Vacancy in the second quarter rose approximately 36 basis points from the previous quarter, and 218 basis points year-over-year. At 6.5%, second quarter vacancy has risen above the 20-year average of 5.8%. Following a seasonal trend, the second quarter closed on a low note with gross absorption at 1.4 million square feet, a 35.6% decrease from the first quarter of 2025. This represents the lowest amount for mid-year levels since Q2 2019. Asking rents in the second quarter of 2025 marginally increased compared to the previous quarter, with average asking rates recording $1.57 per square foot NNN. This represents a modest 0.9% decline year-over-year from Q2 2024. While asking rents appear to be gradually rising in select submarkets, concessions, in the form of TIs and free rent, continue to be a large part of lease negotiations.