MARKET DRIVERS
Since the last quarter, the office availability rate decreased by 50 basis points to 17.9% in 3Q25. Vacancy rates also fell 40 basis points to 17.3% in this timeframe. Net absorption was 513.8K SF this quarter, a stark contrast to the -1.3M SF last quarter.
Cumulatively, the market has experienced -1.1M SF of net absorption, even after this positive quarter. At this point last year, there was -587.7K SF of net absorption, but the year ended at positive 615.4K SF, so there is hope that 2025 could still end positively even after the tough start to the year.
Asking lease rates increased from $4.08 PSF FS (Full Service) to $4.11/SF in the past quarter. This is the same asking rates we saw at this time last year, and shows that asking rates have normalized at this range.
The sales volume reached 1.2M SF this quarter, a step down from the 2.0M SF recorded last quarter. This year’s sale volume has outpaced 2024’s, already 46.3% higher than this time last year. The price per SF for purchases this year is $416.59, higher than the $365.15 rate they were going at last year, but it’s a significant discount from the highs seen in 2022 when buildings were going at $856.45, highlighting investor’s willingness to purchase property at a discount.
Lease volume reached 1.6M SF in 3Q25, and the cumulative volume of transactions this year is 23.5% higher than in 2024.
ECONOMIC REVIEW
California’s unemployment increased 20 bps to 5.5%, while Santa Clara County increased 80 bps to 4.7% between May and August.
The Professional Business Sector in the San Jose, Sunnyvale, Santa Clara Metropolitan
Statistical Area (MSA) fell 2.8% yearly, dropping to 279.6K, the same as it was last quarter. Similarly, the information sector also dropped 0.5% over the year, but added 1.3K jobs since last quarter, reaching 93.7K jobs.
NEAR TERM OUTLOOK
The Silicon Valley office sector is navigating a gradual recovery, with companies selectively expanding and investors focusing on repositioning older properties rather than pursuing ground-up development. A prime example is Ellis Partners’ redevelopment of 755 North Mathilda Avenue in Sunnyvale, formerly a Microsoft campus. The firm acquired the two-building, 105,000 SF property for $15M earlier this year and has begun extensive renovations scheduled to complete in early 2026. Positioned near major freeways and public transit, the upgraded Class A campus—now branded Mathilda Park—is intended to meet tenant demand for high-quality, amenity-driven space in proximity to leading technology employers such as Apple and LinkedIn.
Major technology firms continue to drive significant real estate activity in the region. Nvidia expanded its ownership footprint in Santa Clara with the $83M purchase of 2701 San Tomas Expressway, the fourth building it has acquired within the same office park this year. The company’s latest acquisitions, totaling more than $330M, complement plans for a 324,000 SF headquarters expansion nearby. In San Jose, E Ink Corp. purchased 3200 North First Street for $22.7M, bringing an end to the property’s receivership and restoring stability to an 85,000 SF office and R&D facility once occupied by electric-vehicle maker Nio.
Market indicators point to incremental improvement. Vacancy edged down to 17.3% in 3Q25, compared with 17.7% in the previous quarter, while average asking rents rose slightly to $4.11 PSF (FS). Overall inventory remained steady at about 137 million square feet, with 1.8 million square feet still under construction. Activity is being led by technology and AI-related occupiers, including Walmart, Zscaler, Snap, and OpenAI, which are each evaluating large contiguous blocks of space across Sunnyvale, Santa Clara, and Mountain View. With 18 tenants now searching for 100,000 SF or more, more than double last year’s count, the region’s transition toward higher-quality space and continued AI growth signal a cautiously optimistic path forward for the Silicon Valley office market.
3Q 2025 Silicon Valley Office Market: Key Data Points
Explore our full Silicon Valley office market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Declines Slightly: Silicon Valley’s office vacancy rate fell to 17.3% in Q3 2025, down 40 bps from the previous quarter.
- Asking Lease Rates Hold Steady: Average asking rent remained flat year-over-year at $4.11 PSF (Full Service).
- Net Absorption Turns Positive: Net absorption reached 513.8K SF in Q3, a sharp rebound from -1.3M SF last quarter.
- Sales Volume Surges: Year-to-date sales volume hit 3.95M SF, up 46.3% compared to the same period in 2024.
- Leasing Activity Accelerates: Leasing volume totaled 1.6M SF in Q3, contributing to a 23.5% year-over-year increase.
- No New Deliveries This Quarter: Construction completions remained at zero, reflecting a pause in new supply.
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