Silicon Valley Office Market Report

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

MARKET DRIVERS

The Silicon Valley office market vacancy rate declined 60 basis points (bps) quarter-over-quarter (QOQ) and 170 bps year-over-year (YOY) to 16.0% in 2Q26. Total availability remained flat over the quarter at 16.5%, but is down 210 bps from the same time last year, reflecting continued improvement in overall marketed space.

Leasing activity totaled 1.9M SF in 2Q26, down from 3.0M SF in 1Q26 but above the 1.6M SF recorded in 4Q25. Cumulatively, leasing activity reached 4.9M SF through the first half of 2026, up 34.7% from the same point last year. Net absorption was positive 863.4K SF in the quarter, bringing year-to-date absorption to 1.2M SF — a meaningful improvement from the negative 1.8M SF recorded during the first half of 2025, and marks the fourth consecutive positive quarter.

Office investment sales totaled 1.4M SF in 2Q26, bringing year-to-date sales volume to 2.2M SF. While that figure is 27.4% below the same period last year, dollar volume increased to $627.9M in the quarter and average pricing reached approximately $454/SF, indicating that investors remain selective but are still pursuing well-located assets with stronger tenant profiles.

ECONOMIC REVIEW

In May 2026, Santa Clara County’s unemployment rate was 3.4%, below California’s 5.3% unemployment rate and down from the higher levels recorded earlier in the year. The decline suggests that the local labor market remains comparatively resilient, even as hiring across several office-using sectors has become more measured.

The San Jose-Sunnyvale-Santa Clara MSA’s employment base remained relatively steady entering the second quarter. Based on the latest BLS area data available, total nonfarm employment measured 1.168M jobs in April 2026. Information sector employment totaled 96.2K jobs, while Professional & Business Services employment totaled 276.0K jobs, underscoring that Silicon Valley’s office demand continues to be tied to tech, software, and knowledge-economy users rather than a broad-based office recovery.

NEAR-TERM OUTLOOK

Recent activity in Silicon Valley points to a market that is improving, but still uneven. Vacancy and availability have tightened materially from one year ago, and positive absorption through the first half of 2026 suggests that tenants are beginning to work through some of the excess space that weighed on the market in 2024 and 2025. However, the recovery remains concentrated in larger, high-conviction commitments rather than a broad return of smaller users.

That pattern is visible in the quarter’s largest leasing activity. Palo Alto Networks’ 909.6K SF renewal in Santa Clara, AMD’s 313.9K SF renewal, and Illumio’s 119.8K SF lease at 3315 Scott Blvd. helped anchor quarterly demand and reinforced Santa Clara’s position as one of the market’s strongest office nodes. These transactions also highlight a continued preference for well-located, amenity-rich campuses that can support long-term technology and enterprise software users.

Capital markets activity is also showing signs of selective confidence. The $310.0M sale of Great America Commons in Santa Clara to Ellis Partners and The Baupost Group was one of the largest local office trades of the quarter, while Apple’s $162.2M purchase of 684 W. Maude Ave. in Sunnyvale reflects continued owner-user conviction in core Silicon Valley locations. At the same time, the market remains bifurcated, with older or less competitive assets still facing pressure from high vacancy, conversion discussions, and tenant flight-to-quality. Looking ahead, Silicon Valley’s office market appears positioned for gradual stabilization, but performance will continue to depend heavily on asset quality, submarket, and exposure to AI and technology-driven demand.

Frequently Asked Questions

What is the Silicon Valley office vacancy rate in 2Q 2026?

The Silicon Valley office vacancy rate was 16.0% in 2Q 2026, according to Kidder Mathews research. That represents a 60 basis point decline from 1Q 2026 and a 170 basis point improvement from 2Q 2025. It is the fourth consecutive quarter in which the market has recorded positive net absorption.

How did Silicon Valley office leasing activity perform in 2Q 2026?

Silicon Valley office leasing activity totaled 1.9M SF in 2Q 2026, bringing year-to-date leasing volume to 4.9M SF — a 34.7% increase over the first half of 2025. The largest lease transaction was Palo Alto Networks’ 909,616 SF renewal at 3333 Scott Blvd. in Santa Clara in April 2026 (Data source: CoStar).

What was Silicon Valley office net absorption in 2Q 2026?

Net absorption in the Silicon Valley office market was positive 863,377 SF in 2Q 2026. Year-to-date absorption reached 1.218M SF through the first half of 2026, a significant reversal from the negative 1.751M SF recorded during the same period in 2025. Positive absorption means tenants occupied more space than they vacated during the quarter.

What are asking rents for Silicon Valley office space in 2Q 2026?

Average asking rents in the Silicon Valley office market reached $4.99 per square foot per month on a full-service gross basis in 2Q 2026, up 6.6% year-over-year from $4.68 in 2Q 2025. Rents vary significantly by submarket, ranging from $2.69 PSF in Newark to $7.48 PSF in Palo Alto (Data source: CoStar).

What is the Silicon Valley office availability rate in 2Q 2026?

The Silicon Valley office availability rate was 16.5% in 2Q 2026, unchanged quarter-over-quarter but down 210 basis points from 18.6% in 2Q 2025. The tightening reflects a continued reduction in marketed space across the market, according to Kidder Mathews research.

Which Silicon Valley office submarket has the lowest vacancy in 2Q 2026?

Cupertino had the lowest office vacancy rate in Silicon Valley in 2Q 2026 at 1.5%, with a total vacancy rate of 1.6% and an availability rate of 2.0%. Palo Alto had the highest asking rent at $7.48 PSF, while Newark had the highest vacancy at 32.3% and the lowest asking rent at $2.69 PSF (Data source: CoStar).

How much Silicon Valley office space is under construction in 2Q 2026?

There was 1,079,112 SF of office space under construction in Silicon Valley in 2Q 2026, down 33.6% from 1,626,107 SF in 2Q 2025. The two projects under construction are Google Caribbean in Sunnyvale (820,078 SF, expected December 2026) and 465 Fairchild Dr in Mountain View (259,034 SF, expected June 2027). There were zero new deliveries in 2Q 2026 (Data source: CoStar).

What were the largest office sales in Silicon Valley in 2Q 2026?

The largest office sale in Silicon Valley in 2Q 2026 was Great America Commons in Santa Clara — 634,760 SF sold for $310.0M ($488.37/SF) to Ellis Partners and The Baupost Group from PGIM, Inc. The second largest was Apple’s $162.2M purchase of 684 W. Maude Ave. in Sunnyvale (194,622 SF at $833.36/SF) from Union Investment and Metzler R.E. (Data source: CoStar).

What were the largest office lease transactions in Silicon Valley in 2Q 2026?

The largest lease transaction in Silicon Valley in 2Q 2026 was Palo Alto Networks’ 909,616 SF renewal at 3333 Scott Blvd. in Santa Clara (landlord: Preylock Holdings) in April 2026. The second largest was AMD’s 313,906 SF renewal at 2485 & 2755 Augustine Dr. in Santa Clara (landlord: The Irvine Company) in June 2026. Both were direct lease transactions (Data source: CoStar).

How is the Silicon Valley office market trending in 2026?

The Silicon Valley office market is gradually stabilizing in 2026. Vacancy has declined 170 basis points year-over-year to 16.0%, and year-to-date net absorption reached 1.2M SF — a reversal from the negative 1.8M SF recorded in the first half of 2025. Recovery remains concentrated in high-conviction transactions from technology and AI-related tenants, while older and less competitive assets continue to face pressure from elevated vacancy and conversion discussions, according to Kidder Mathews research.

Last updated: Q2 2026. Data source: CoStar, BLS, EDD, FRED, Silicon Valley Business Journal, The Real Deal, CoStar News. Compiled by the Kidder Mathews Research Group.

2Q 2026 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 Continues to Improve: Silicon Valley’s office vacancy rate declined to 16.0% in 2Q 2026, down 170 basis points year-over-year and 60 basis points from the previous quarter.
• Asking Rents Trend Higher: Average asking rents reached $4.99 PSF full-service gross, a 6.6% increase from 2Q 2025.
• Positive Absorption Momentum: Net absorption totaled 863K SF during the quarter, bringing year-to-date absorption to 1.2M SF and marking the fourth consecutive quarter of positive demand.
• Leasing Activity Remains Strong: Tenants leased 1.9M SF in 2Q 2026, while year-to-date leasing volume reached 4.9M SF, up 34.7% compared to the first half of 2025.
• Availability Tightens: The market availability rate held at 16.5% quarter-over-quarter and improved 210 basis points year-over-year, reflecting a continued reduction in marketed space.
• Construction Pipeline Shrinks: Office space under construction totaled 1.1M SF, down 33.6% year-over-year as developers remain cautious amid evolving tenant demand.

Submarket Statistics

Significant Sale Transactions 2Q 2026

Significant Lease Transactions 2Q 2026

Significant Under Construction