The Peninsula Industrial & R&D market in 2Q 2026 experienced improving industrial vacancy and a rebound to positive net absorption, while R&D vacancy remained elevated at 24.6% alongside notably higher asking rents of $5.82 PSF. Industrial leasing activity held steady year-over-year and average asking rents eased modestly, even as investment sales volume declined sharply. Explore our full Peninsula Industrial & R&D market review for submarket-level performance and detailed trend analysis.
Frequently Asked Questions
What is the industrial vacancy rate in the Peninsula for 2Q 2026?
The Peninsula industrial direct vacancy rate was 7.3% in 2Q 2026, down 50 basis points from 7.8% in 2Q 2025, according to Kidder Mathews research. Total availability rate, which includes sublease space, rose to 10.1%, up 110 basis points year-over-year. The improvement in direct vacancy alongside rising availability suggests some occupiers are still shedding excess space through sublease even as direct leasing firms up.
How much industrial space was absorbed in the Peninsula in 2Q 2026?
Net absorption totaled 89,798 SF in 2Q 2026 and 90,642 SF year-to-date, a sharp turnaround from negative 498,218 SF recorded over the same period in 2025 (Data source: CoStar). Positive net absorption means tenants occupied more space than they vacated during the period, a sign of strengthening demand relative to last year.
What are current industrial asking rents in the Peninsula?
The average direct asking lease rate across the Peninsula industrial market was $1.98 per SF per month (NNN) in 2Q 2026, down 3.3% from $2.05 a year earlier, according to Kidder Mathews research. Submarket rates range from $1.74 PSF in South San Francisco to $2.95 PSF in Menlo Park, reflecting significant variation by location.
How much industrial leasing activity took place in the Peninsula in 2Q 2026?
Leasing activity totaled 234,570 SF in 2Q 2026 and 639,316 SF year-to-date, essentially flat (up 0.8%) compared to 634,454 SF over the same period in 2025 (Data source: CoStar). South San Francisco led all submarkets with 131,629 SF of quarterly leasing activity.
What was the largest industrial sale in the Peninsula in 2Q 2026?
The largest industrial sale of the quarter was 2634 Bayshore Blvd in Daly City (Brisbane/Daly City submarket), a 12,340-SF building that sold for $4,100,000 ($332.25/SF), according to Kidder Mathews research. Threeandnine, LLC purchased the property from Air Protein.
What was the largest industrial lease signed in the Peninsula in 2Q 2026?
The largest lease of the quarter was 576 Eccles Avenue in South San Francisco, where ZipLine leased 24,194 SF from Odeko (Sublessor) in May 2026, according to Kidder Mathews research. Two additional large leases were signed in South San Francisco and Burlingame during the quarter.
Is there an industrial construction pipeline in the Peninsula?
Construction deliveries held steady year-over-year in 2Q 2026, according to Kidder Mathews research, with no new speculative or build-to-suit projects reported as under construction this quarter. The Peninsula’s constrained land supply continues to limit new industrial development compared to other Bay Area submarkets.
How does Peninsula industrial investment sales activity compare year-over-year?
Industrial sales volume totaled 313,315 SF year-to-date through 2Q 2026, down 49.2% from 616,869 SF over the same period in 2025, according to Kidder Mathews research (Data source: CoStar). The decline reflects broader caution among investors amid higher interest rates and limited available product.
Which Peninsula submarket has the lowest industrial vacancy?
Redwood City posted the lowest direct vacancy rate at 4.8% in 2Q 2026, followed closely by Brisbane/Daly City at 5.1%, according to Kidder Mathews research. San Bruno/Millbrae had the highest direct vacancy rate at 23.6%, well above the market average of 7.3%.
How does the Peninsula R&D vacancy rate compare to industrial in 2Q 2026?
Peninsula R&D total vacancy stood at 24.6% in 2Q 2026, far higher than the industrial market’s 8.8% total vacancy rate, according to Kidder Mathews research. Average direct R&D asking rents were also considerably higher at $5.82 per SF NNN, compared to $1.98 PSF for industrial space, reflecting the specialized, lab-oriented nature of R&D product.
What is the outlook for the Peninsula industrial market?
The Peninsula industrial market is trending toward improving fundamentals, with declining direct vacancy and a rebound to positive net absorption after a negative 2025, according to Kidder Mathews research. Softening asking rents and rising availability suggest landlords may need to remain competitive on pricing even as occupancy trends improve.
Last updated: 2Q 2026. Data source: CoStar. Compiled by the Kidder Mathews Research Group.
2Q 2026 Peninsula Industrial & R&D Market: Key Data Points
Explore our full Peninsula Industrial & R&D market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Direct Vacancy Continues to Improve: The Peninsula industrial direct vacancy rate declined to 7.3% in 2Q 2026, down 50 basis points from 7.8% one year ago.
- Positive Absorption Rebounds: Net absorption totaled 89,798 SF during 2Q 2026 and 90,642 SF year-to-date, a significant improvement from the 498,218 SF of negative absorption recorded during the same period in 2025.
- Leasing Activity Holds Steady: Peninsula industrial leasing activity reached 639,316 SF year-to-date, essentially flat with 634,454 SF recorded during the same period last year.
- Availability Expands Across the Market: Total availability increased to 10.1%, up 110 basis points year-over-year, indicating tenants continue to have more options despite improving occupancy trends.
- Asking Lease Rates Ease: Average direct asking rents measured $1.98 PSF per month, a 3.3% decrease from $2.05 PSF one year earlier.
- Investment Sales Activity Slows: Industrial sales volume totaled 313,315 SF year-to-date, down 49.2% from 616,869 SF during the same period in 2025.
Peninsula Industrial Submarket Statistics
| Submarket | Total Inventory (SF) |
Direct Vacancy Rate |
Total Vacancy Rate |
Total Available Rate |
2Q26 Net Absorption (SF) |
YTD Net Absorption (SF) |
2Q26 Leasing Activity (SF) |
Avg Direct Rental Rate (NNN) |
|---|---|---|---|---|---|---|---|---|
| Brisbane/Daly City | 4,732,108 | 5.1% | 7.3% | 9.1% | -151,028 | -113,018 | 4,692 | $1.75 |
| South San Francisco | 12,359,056 | 7.3% | 8.4% | 10.2% | 198,844 | 215,082 | 131,629 | $1.74 |
| San Bruno/Millbrae | 985,597 | 23.6% | 23.6% | 23.6% | 0 | 0 | 9,542 | $1.90 |
| Burlingame | 3,224,335 | 7.0% | 12.3% | 16.8% | 95,716 | 73,315 | 52,887 | $1.94 |
| San Mateo | 988,278 | 10.1% | 11.1% | 14.6% | -5,531 | -5,319 | 7,965 | $2.10 |
| Belmont/San Carlos | 3,647,832 | 6.2% | 7.0% | 8.6% | -21,634 | -53,192 | 23,905 | $2.39 |
| Redwood City | 2,767,977 | 4.8% | 4.9% | 6.6% | -25,522 | -37,631 | 3,950 | $2.19 |
| Menlo Park | 2,220,337 | 9.6% | 9.6% | 11.8% | -1,047 | 11,405 | 0 | $2.95 |
| Industrial Total | 30,925,520 | 7.3% | 8.8% | 10.1% | 89,798 | 90,642 | 234,570 | $1.98 |
Data as of 2Q 2026. Source: CoStar. Prepared by the Kidder Mathews Research Group.
Significant Sale Transactions 2Q 2026
| Property | Submarket | SF | Sale Price | $/SF | Buyer | Seller |
|---|---|---|---|---|---|---|
| 2634 Bayshore Blvd | Brisbane/Daly City | 12,340 | $4,100,000 | $332.25 | Threeandnine, LLC | Air Protein |
| 1815 Bayshore Hwy | Burlingame | 10,680 | $3,825,000 | $358.15 | Constructive Solutions | Lorraine M Arnaudo Family Ptp |
| 2951 Middlefield Rd | Redwood City | 3,961 | $1,900,000 | $479.68 | Door Pro Properties, LLC | Door Pros |
Significant Lease Transactions 2Q 2026
| Property | Submarket | SF | Transaction Date | Landlord | Tenant |
|---|---|---|---|---|---|
| 576 Eccles Avenue | South San Francisco | 24,194 | May 2026 | Odeko (Sublessor) | ZipLine |
| 179 Starlite Street | South San Francisco | 22,275 | June 2026 | Longpoint Realty Partners | Raison D’etre Bakery |
| 845 Stanton Road | Burlingame | 18,681 | May 2026 | Feltsberg, LLC | Any Breakers |
Data as of 2Q 2026. Source: CoStar. Prepared by the Kidder Mathews Research Group.
Peninsula R&D Submarket Statistics
| Submarket | Total Inventory (SF) |
Direct Vacancy Rate |
Total Vacancy Rate |
Total Available Rate |
2Q26 Net Absorption (SF) |
YTD Net Absorption (SF) |
2Q26 Leasing Activity (SF) |
Avg Direct Rental Rate (NNN) |
|---|---|---|---|---|---|---|---|---|
| South San Francisco | 9,401,544 | 21.4% | 24.9% | 25.8% | 232,507 | 203,756 | 133,178 | $6.62 |
| San Bruno/Millbrae | 816,246 | 39.1% | 46.9% | 49.7% | 3,200 | 4,395 | 3,200 | $4.14 |
| Burlingame | 859,514 | 2.5% | 2.5% | 4.5% | -2,580 | -6,359 | 755 | $3.59 |
| Brisbane/Daly City | 1,979,180 | 23.0% | 28.4% | 48.2% | 34,485 | 72,170 | 0 | $5.90 |
| San Mateo | 705,479 | 48.0% | 52.4% | 54.4% | 9,926 | 17,345 | 0 | $6.00 |
| Belmont/San Carlos | 2,395,361 | 16.1% | 20.4% | 21.9% | -18,869 | 308,774 | 8,080 | $5.54 |
| Redwood City | 2,938,103 | 15.4% | 19.2% | 29.8% | -8,218 | 29,949 | 31,445 | $4.74 |
| Menlo Park | 2,243,193 | 21.5% | 23.2% | 27.7% | 36,491 | -126,386 | 8,531 | $5.50 |
| R&D Total | 21,338,620 | 21.0% | 24.6% | 29.2% | 286,942 | 503,644 | 185,189 | $5.82 |
Data as of 2Q 2026. Source: CoStar. Prepared by the Kidder Mathews Research Group.
ContactGARY BARAGONA |
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