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Silicon Valley commercial real estate market cools after big gains in 2016

black and white coverApril 13, 2017 – Silicon Valley’s commercial real estate market showed signs of cooling down in the first quarter of 2017 after last year’s boom in activity, the Silicon Valley Institute for Regional Studies reported today.

While developers continued to break ground throughout the Bay Area in Q1, a slowdown in pre-leasing activity in the suburban markets led to increased vacancy rates when unleased projects were completed, the report noted.

The report is the first in a new series of quarterly commercial real estate updates from the Institute, which provides research and analysis on a variety of regional issues and is housed within Joint Venture Silicon Valley.

The Institute also found that office space rental rates are coming back down slightly from a jump in 2016 as sublease space and increasing availabilities driven by M&A activity provide a release valve for tenants. Also, the demand for transit-oriented commercial space remains high, leading to continued increases in rental rates, decreases in vacancy rates, and continued development along major transit lines.

Last year saw an enormous amount of newly constructed space hit the market, much of it preleased, along with low vacancy rates (lower than in any year since 2001 across all types of space), and rising commercial rents (which reached nearly $4.50 per square foot for office space). Although requirements for larger spaces have declined, many tech companies are continuing their growth, albeit at a slower pace when compared to 2015-2016.

The Institute report contains detailed data and charts on new commercial development, commercial vacancy rates, commercial rents and tech occupancy. It was produced in partnership with JLL Silicon Valley.

Download the report

About the Silicon Valley Institute for Regional Studies

The Silicon Valley Institute for Regional Studies provides research and analysis on a host of issues facing Silicon Valley’s economy and society. The Institute is housed within Joint Venture Silicon Valley. For more information, visit www.siliconvalleyindicators.org.

About Joint Venture Silicon Valley

Established in 1993, Joint Venture provides analysis and action on issues affecting the Silicon Valley economy and quality of life. The organization brings together established and emerging leaders—from business, government, academia, labor and the broader community—to spotlight issues, launch projects and work toward innovative solutions. For more information, visit www.jointventure.org.

JLL Silicon Valley

JLL is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For more information, visit www.jll.com/silicon-valley.

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