Silicon Valley Office Market Report

4th Quarter 2022

Posted In — Market Research | Market Report


WITH INFLATION, a declining economy, and employee desire to work from home, tenants are continuing to re-evaluate their space needs resulting in excess space being placed back on the market for lease. As a result, the market wide availability rate increased to 19.2% in 4Q22, a jump of nearly 25% YOY and 12% QOQ.

VACANCY RATES remained steady, hovering between 12% and 13% in 2022. The largest office submarket – San Jose – was a big factor in keeping the office market steady, dropping from 12.6 in 3Q22 to 12.4 in 4Q22, a 1.3% decrease QOQ.

ALTHOUGH ASKING LEASE RATES increased 2.1% YOY, from $4.84 in 4Q21 to $4.94 in 4Q22, they are down 2.6% QOQ from $5.07.

WITH MANY COMPANIES continuing to implement the hybrid and work-from-home models and investors being wary of current economic conditions, sales volume decreased 50.4% YOY from 1.5 million SF in 4Q21 to 720,863 SF in 4Q22. Additionally, the total sales volume declined by 62.3% from 6.1 million in 2021 to 2.3 million in 2022.

NET ABSORPTION decreased 83.7% YOY from 1.8 million SF in 4Q21 to 296k SF in 4Q22 and fell 23.8% QOQ from 388k.


SANTA CLARA COUNTY’S unemployment rate increased slightly this quarter to 2.3% but has consistently remained lower than the state of California’s rate of 4.0%.

THE PROFESSIONAL BUSINESS SERVICES sector of the San Jose-Sunnyvale-Santa Clara MSA reached a total of 266,200 jobs by 4Q22, a 14,000-job improvement from 4Q21 and a 3,800 job increase QOQ. Despite the growth, the job gains appear to be slowing. For example, there were 6,200 jobs added in 3Q22 and 4Q22 had the least growth for the year.


OVERALL, SALES VOLUME has been significantly lower than pre-pandemic averages, this is especially true in downtown cores. There is some good news in that there were 64 total investment grade sales in the metro area, but this is less than half of the 137 sales recorded in 2019.

DESPITE RECENT OFFICE MARKET SETBACKS, over 600k SF of new development has been approved this quarter for downtown San Jose. Additionally, Google and Meta have also received approvals for a combined 2.5 million SF of new office projects.

WITH MORE THAN HALF of the Silicon Valley sublease market coming from the tech sector, looming layoffs, the recession, and corporate downsizing is anticipated for much of 2023.

Click here to subscribe to Kidder Mathews market research.

Share This Report