South Peninsula Office Market Report
While the construction pipeline has dramatically slowed, both direct and sublease space is still returning to the market. This increase in supply pushed the overall availability rate up to 25.7% in the second quarter from 24.5% at year-end 2023. Demand from tenant requirements steadily declined in the past four quarters to 4.2% of total inventory after peaking at 9.4% in the third quarter of 2023. With the economy possibly stabilizing, we expect to see an increase in tenant demand. Weak demand coupled with a glut of available space put downward pressure on asking rents this quarter. After peaking in 2022, asking rents fell 6.9% in the first half of the year to $5.70/SF. While asking rents are declining, concessions, including TIs and free rent, play a big part in lease negotiations. In addition, as companies continue to look for ways to bring people back to the office, amenities such as conference rooms, flexible workspace and up-to-date infrastructure, are important
Download South Peninsula Office Market Report 2Q24South Peninsula R&D Market Report
Net absorption in the first quarter of 2024 was relatively flat, posting just ±10,077 square feet of quarter of occupancy losses, causing the vacancy rate to rise to 15.7%. Comparatively, this is a relatively quiet quarter following a year when 1.4 million square feet was vacated in the South Peninsula R&D market, causing vacancy to rise from 9.9% to 15.5% in a single year. The construction pipeline totals ±1.1 million square feet following the completion of 3150 Bay Road in Redwood City, a ±31,170 square foot life science conversion. Rents fell 3.2% quarter over quarter from $5.28 to $5.11 after holding at the same level for the previous three quarters. Although R&D space in the region has always commanded high rents owing to the presence of high-quality R&D space and life science users, that number could fall as market fundamentals soften.
Download South Peninsula R&D Market Report 2Q24