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Silicon Valley Office Market Report

1st Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

ASKING lease rates rose 2.1% year-over-year (YOY) to $4.88/SF full service.

TOTAL NET ABSORPTION was 813,035 SF and remained positive for three straight quarters.

SALE VOLUME gained 14.2% YOY to 669,245 SF.

VACANCY RATES crept upward 3.7% YOY from 11.8% in 1Q 2021 to 12.2% in 1Q 2022.

GROSS ABSORPTION declined 32% YOY from 1.1 million SF in 1Q 2021 to 767,962 SF in 1Q 2022. Santa Clara and San Jose were the most active markets with 387,673 SF and 203,336 SF respectively.

ECONOMIC OVERVIEW

UNEMPLOYMENT in California was 5.4% for February 2022. Santa Clara County reported an unemployment rate of 2.9% during this period.

THE CIVILIAN LABOR FORCE for the San Jose-Sunnyvale-Santa Clara MSA grew 5.8% YOY to 1.1 million workers. The professional and business services sector grew 3.9% YOY to 248,600 jobs.

NEAR-TERM OUTLOOK

WITH THE LIFTING of indoor mask mandates in March 2022, companies have been more open in pursuing long term leases and renewals. Major tech companies are planning strategies to better utilize their office spaces, ranging from hybrid work schedules to a full pre-covid five-day workweek.

WHILE RISING INTEREST rates may dampen investment flow, the large concentration of technology and biotech firms fuel demand for more office space.

LANDLORDS HAVE BEEN hesitant to lower asking rates, especially with the market feeling ever closer to a full recovery.

 
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