Silicon Valley Industrial Market Report

The following reflects Silicon Valley industrial market conditions as of Q2 2026.

MARKET DRIVERS

Silicon Valley’s industrial and warehouse segments moved in different directions through the second quarter of 2026. Industrial availability decreased 140 basis points quarter-over-quarter to 4.7%, now 90 basis points below the prior year, while warehouse availability rose 70 basis points to 9.1%, 50 basis points higher year-over-year. Direct vacancy followed a similar split: industrial vacancy dropped 100 basis points quarter-over-quarter to 4.4%, 40 basis points below year-ago levels, while warehouse vacancy increased 60 basis points to 7.5% and now sits 180 basis points higher year-over-year.

Asking rents also diverged by product type. Direct industrial asking rents declined 4.2% year-over-year to $1.84 per square foot per month NNN, though they remain above the five-year average of $1.76. Warehouse asking rents climbed 6.4% over the same period to $1.67 PSF NNN, well above their five-year average of $1.45.

Leasing demand was healthy across both segments. Industrial leasing activity ran 23.5% ahead of last year’s cumulative pace, while warehouse activity was 49.7% higher, supported by roughly 1.3 million square feet of leasing in the quarter. Sales activity was more mixed: industrial sales volume reached 761,453 square feet year-to-date, 528.7% above last year’s cumulative total, while warehouse sales totaled 333,145 square feet, 46.2% below the prior-year pace. Industrial net absorption stayed positive for a second consecutive quarter at 355,224 square feet, lifting year-to-date absorption to 370,583 square feet, whereas warehouse absorption remained negative at -39,056 square feet for the quarter and -430,277 square feet year-to-date as available space continued to expand.

ECONOMIC OVERVIEW

California’s unemployment rate held steady at 5.3% in May 2026, while Santa Clara County recorded a 3.4% rate, remaining below the statewide figure. Key industrial-driving sectors in the San Jose-Sunnyvale-Santa Clara Metropolitan Statistical Area (MSA) stayed relatively stable entering midyear. Manufacturing employment totaled 128,300 jobs in May 2026, up 1.1% year-over-year, while trade, transportation, and utilities employment reached 116,500 jobs, up 0.4% year-over-year.

NEAR-TERM OUTLOOK

Silicon Valley’s industrial market carried stronger momentum into the second half of 2026, led by improving industrial fundamentals and steady demand from advanced manufacturing and technology-adjacent users. Industrial vacancy fell to 4.4% and availability tightened to 4.7%, indicating that tenants are absorbing functional product faster than new space is delivered, while positive absorption of 355,224 square feet in the quarter and 370,583 square feet year-to-date suggests the segment is stabilizing. Warehouse fundamentals remain more uneven: leasing is nearly 50% ahead of last year, but availability climbed to 9.1% and vacancy rose to 7.5% as move-outs and newly available blocks outpaced occupancy gains.

Recent transactions reinforce where demand is concentrated. Super Micro Computer leased a 714,491-square-foot campus on Qume Drive in San Jose to support its AI infrastructure manufacturing operations, and NVIDIA leased 302,775 square feet at 5853 Rue Ferrari in San Jose, underscoring how AI hardware, server manufacturing, and advanced production are driving large industrial requirements. Hines’ acquisition of the 155,500-square-foot Cherry Street Tech Center in Newark points to continued investor interest in manufacturing-ready assets.

Looking ahead, the market should remain bifurcated. Industrial product with power capacity, flexible layouts, and access to the region’s advanced manufacturing ecosystem is positioned to outperform, while warehouse space may stay under pressure until availability begins to compress. With limited new construction and several large users still expanding, the near-term outlook remains constructive, though performance will continue to vary by product type, building functionality, and submarket.

Frequently Asked Questions

What is the industrial vacancy rate in the Silicon Valley industrial market in Q2 2026?

The Silicon Valley industrial vacancy rate was 4.4% in Q2 2026, down 100 basis points from the prior quarter and 40 basis points below the same period a year earlier, according to Kidder Mathews research. Warehouse vacancy moved in the opposite direction, rising 60 basis points quarter-over-quarter to 7.5%, which is 180 basis points higher year-over-year. The divergence reflects firmer demand for functional industrial product relative to logistics space.

What are industrial and warehouse availability rates in the Silicon Valley market in Q2 2026?

Industrial availability fell to 4.7% in Q2 2026, down 140 basis points from the prior quarter and 90 basis points below a year ago, while warehouse availability rose to 9.1%, up 70 basis points quarter-over-quarter and 50 basis points year-over-year (Data source: CoStar). Availability measures space being marketed for lease, including space that is not yet vacant, so it tends to run ahead of vacancy. The tightening industrial figure alongside the rising warehouse figure points to a market splitting by product type.

What are average asking rents for Silicon Valley industrial space in Q2 2026?

Average asking rents for Silicon Valley industrial space were $1.84 per square foot per month NNN in Q2 2026, down 4.2% year-over-year but still above the five-year average of $1.76, according to Kidder Mathews research. Warehouse asking rents rose 6.4% year-over-year to $1.67 PSF NNN, above their five-year average of $1.45. By submarket, industrial asking rents ranged from $1.22 PSF NNN in Newark to $2.92 PSF NNN in Mountain View.

How much leasing activity occurred in the Silicon Valley industrial market in Q2 2026?

Silicon Valley industrial leasing reached 843,246 square feet in Q2 2026, bringing year-to-date activity to 1,450,762 square feet, which is 23.5% ahead of the same point last year, according to Kidder Mathews research. Warehouse leasing was even stronger on a relative basis, running 49.7% above last year’s pace and driven by roughly 1.3 million square feet of activity in the quarter. Demand was concentrated in larger requirements tied to advanced manufacturing and technology users.

What was net absorption in the Silicon Valley industrial market in Q2 2026?

Industrial net absorption was a positive 355,224 square feet in Q2 2026, the second straight quarter of gains, lifting year-to-date absorption to 370,583 square feet, according to Kidder Mathews research. Net absorption measures the net change in occupied space, so a positive figure means tenants occupied more space than they vacated. Warehouse net absorption was negative 39,056 square feet for the quarter and negative 430,277 square feet year-to-date, as newly available blocks outpaced move-ins.

How much industrial space is under construction in the Silicon Valley market in Q2 2026?

There was 709,114 square feet of industrial space under construction in Silicon Valley in Q2 2026, with no warehouse space under construction, according to Kidder Mathews research. The pipeline is concentrated in Fremont and Milpitas, including the 345,242-square-foot Campus @ Bayside in Fremont and the 294,000-square-foot project at 475 Sycamore Drive in Milpitas, both slated for September 2026 delivery. Limited new supply is expected to support fundamentals over the near term.

What was the largest industrial sale in the Silicon Valley market in Q2 2026?

The largest industrial sale in Q2 2026 was the 155,500-square-foot Cherry Street Tech Center at 38083 Cherry Street in Newark, which Hines acquired for $28,600,000, or $183.92 per square foot, from United Logistics Solutions, Inc. (Data source: CoStar). Other notable transactions included 876 Yosemite Drive in Milpitas, which sold for $21,875,000, or $437.50 per square foot. Industrial sales volume reached 761,453 square feet year-to-date, 528.7% above last year’s cumulative total.

What were the largest industrial leases in the Silicon Valley market in Q2 2026?

The largest lease of the quarter was Super Micro Computer Inc.’s 714,491-square-foot commitment at 2350 Qume Drive in San Jose, signed in April 2026 to support its AI infrastructure manufacturing operations, according to Kidder Mathews research. NVIDIA followed with a 302,775-square-foot lease at 5853 Rue Ferrari in San Jose, also signed in April 2026. Tesla leased 107,719 square feet at 2256 Junction Avenue in San Jose during the same period.

How did Silicon Valley industrial sales volume compare to last year in Q2 2026?

Industrial sales volume totaled 761,453 square feet year-to-date through Q2 2026, up 528.7% from the same point in 2025, according to Kidder Mathews research. Warehouse sales moved the other way, with 333,145 square feet sold year-to-date, down 46.2% from a year earlier. The contrast underscores stronger investor appetite for manufacturing-ready industrial assets than for logistics product.

How is the Silicon Valley economy supporting industrial demand in Q2 2026?

California’s unemployment rate held steady at 5.3% in May 2026, while Santa Clara County recorded a lower 3.4% rate, according to data from the EDD and BLS. In the San Jose-Sunnyvale-Santa Clara MSA, manufacturing employment reached 128,300 jobs in May 2026, up 1.1% year-over-year, and trade, transportation, and utilities employment reached 116,500 jobs, up 0.4% year-over-year. This stable labor backdrop has helped underpin demand from advanced manufacturing and technology-adjacent users.

What is the outlook for the Silicon Valley industrial market in Q2 2026?

The near-term outlook is constructive but bifurcated, according to Kidder Mathews research. Industrial product with power capacity, flexible layouts, and access to Silicon Valley’s advanced manufacturing ecosystem is positioned to outperform, while warehouse space may stay under pressure until availability begins to compress. With limited new construction and several large users still expanding in the region, performance is expected to continue varying by product type, building functionality, and submarket.

Last updated: Q2 2026. Data source: CoStar, EDD, BLS, FRED, Silicon Valley Business Journal, San Francisco Business Times, Bisnow. Compiled by the Kidder Mathews Research Group.

Q2 2026 Silicon Valley Industrial Market: Key Data Points

Explore our full Silicon Valley industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.

• Industrial vacancy: Direct industrial vacancy dropped 100 basis points quarter-over-quarter to 4.4% in Q2 2026, now 40 basis points below year-ago levels.
• Warehouse vacancy: Warehouse vacancy rose to 7.5%, up 180 basis points year-over-year, as available space continued to expand.
• Asking rents: Industrial rents averaged $1.84 PSF NNN (down 4.2% YOY but above the five-year average of $1.76), while warehouse rents reached $1.67 PSF NNN, up 6.4% YOY.
• Net absorption: Industrial net absorption was a positive 355,224 SF in the quarter (370,583 SF year-to-date), while warehouse absorption was negative at -39,056 SF (-430,277 SF year-to-date).
• Leasing activity: Industrial leasing ran 23.5% ahead of last year’s pace, and warehouse leasing was 49.7% higher, driven by roughly 1.3 million SF in the quarter.
• Construction pipeline: 709,114 SF of industrial space was under construction across Fremont and Milpitas, with no warehouse space under construction.
• Largest sale: Hines acquired the 155,500 SF Cherry Street Tech Center at 38083 Cherry Street in Newark for $28,600,000, or $183.92 per square foot.

Submarket Statistics

Significant Sale Transactions Q2 2026

Significant Lease Transactions Q2 2026

Significant Under Construction