Silicon Valley Market Reports | Newmark

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Silicon Valley Market Reports | Newmark

Silicon Valley Office Market

Average FS Asking Rent (Price/SF) $4.94
Availability Rate (%) 10.9%
Net Absorption (SF) -838,644

The Silicon Valley office market saw another increasingly slow quarter as the ongoing pandemic has hampered companies’ ability and desire to make real estate decisions. While a number of companies are still signing deals as their leases end, not many of the large real estate moves that Silicon Valley has become accustomed to in recent history are being seen. Overall net absorption continued to drop in the third quarter of 2020, ending up at negative 1,015,569 square feet. While this is a large drop from the record-breaking numbers noted in 2018 and 2019, the market has seen much lower numbers in recent history. In addition to spaces becoming available and contributing to this negative net absorption, total gross office absorption hit an all-time low point in the third quarter, with just 499,965 square feet of absorption. With record-low gross absorption and a steady addition of new space, the overall vacancy rate rose by 0.83 percentage points to 10.86%. Despite a drop in office demand, average office asking rates are still holding steady at $4.65/SF.

Download Silicon Valley Office Market Report 3Q20

Silicon Valley R&D Market

Average NNN Asking Rent (Price/SF) $2.39
Availability Rate (%) 12.2%
Net Absorption (SF) -2,003,509

The Silicon Valley R&D market saw a large influx of new availabilities this quarter, pushing the overall net absorption to negative 2,003,509 square feet, the lowest net absorption since 2009. Alternatively, this quarter’s gross absorption is the highest of 2020, at 1,503,684 square feet. This is by no means an indication that the R&D market is already recovering from the effects of the pandemic, but it is promising that overall leasing activity is holding steady through the third quarter. These new availabilities also caused the vacancy to rise 1.24 percentage points to 12.22%. This number is only slightly higher than the rate has been in recent years and is still lower than the vacancy rates posted prior to 2015. Asking rates held historically strong in the third quarter, rising by $0.03/SF to $2.39/SF.

Download Silicon Valley R&D Market Report 3Q20

Silicon Valley Industrial/Warehouse Market

Industrial

Warehouse

Three of the largest deals this quarter were in San Jose, making it the best performance this quarter, with the highest net and gross absorption at 91,351 square feet and 323,235 square feet, respectively. Santa Clara had the lowest net absorption with negative 82,487 square feet but had the second highest gross absorption with 320,731 square feet, the main contributing factor being a three-building sale of 228,764 square feet in the 101 South submarket. The asking rate in Santa Clara dropped to $1.29/SF and Campbell down to $1.64/SF, both a 10-cent decrease from the second quarter. Sunnyvale also saw a drop of $0.07/SF, down to $1.50/SF. On the flip side, in Newark, the price rose $0.03/SF to $1.38/SF, and San Jose rose to $1.23/SF, a $0.06/SF jump from last quarter.

Four of the six submarkets in the warehouse market posted six-digit gross absorption this quarter, with Milpitas just missing the mark with 94,579 total square feet leased and Sunnyvale failing to have a single transaction this quarter. Additionally, no submarket posted negative net absorption this quarter, an accomplishment not seen since 2016. This, along with only a few new leases becoming available, saw the vacancy rate fall across all submarkets. Santa Clara saw the biggest decrease reaching 7.03%, over three points down from the previous quarter, the lowest mark in the submarket since the beginning of 2018.

Download Silicon Valley Industrial Market Report 3Q20


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Silicon Valley Market Reports | Newmark

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