Silicon Valley Office Market
Absorption in the third quarter of 2023 totaled negative -677,481 SF. This is the sixth consecutive quarter of negative absorption, during which time the vacancy rate has risen to 19.4%. Sublease space continues to push this figure higher, with large block space entering the market in the San Jose and Sunnyvale submarkets. Year to date, there has been 1.8 million SF of net occupancy losses. The construction pipeline fell to 3.0 million SF this quarter, owing to the completion of 200 Park as well as Boston Properties’ Platform 16 project being put on hold. Sublease space in the Valley has risen greatly in recent years, reaching 6.0 million SF this quarter – a 219% increase since its lowest point in Q1 2020. This in turn has put downward pressure on rents, which have increased just 0.8% year over year to $5.01/SF.Download Silicon Valley Office Market Report 3Q23
Silicon Valley R&D Market
Net absorption in the third quarter of 2023 totaled negative 1.04 million SF, with year to date net absorption measuring negative 2.02 million SF. This is the sixth consecutive quarter of occupancy losses in the R&D sector, and the largest quarter of occupancy losses since the third quarter of 2020. Despite occupancy losses, R&D rents have continued to climb in the Valley, increasing to $2.86/SF, a 2.1% increase quarter over quarter. Life Science rents continue to push this level higher despite making up a small percentage of the total inventory, such as in Fremont, which now averages $2.90/SF overall asking rent. The vacancy rate increased this quarter to 11.0%, a 110 basis point increase quarter over quarter primarily due a large influx of sublease space in Mountain View.Download Silicon Valley R&D Market Report 3Q23
Silicon Valley Industrial Market
Net absorption in the third quarter of 2023 totaled negative 17,732 SF in the industrial sector and negative 183,851 SF in the warehouse sector, for a total of 201,583 SF of occupancy losses. As a result, the industrial vacancy rate held firm at 4.2% and the warehouse vacancy rate increased from 3.5% to 3.9% quarter over quarter. Asking lease rates in the industrial sector increased from $1.54 to $1.58, while warehouse asking rents fell from $1.27 to $1.16 quarter over quarter. Given the current low level of availability, rent fluctuations like this can be common and do not represent a contraction of the market. Of the 2.0 million SF of new industrial product under construction, 10% of it is preleased and 422,000 SF is set to complete this year, representing a significant amount of new supply that could drive up vacancy rates again.
Download Silicon Valley Industrial Market Report 3Q23