MARKET DRIVERS
Asking lease rates dipped 1.1% year-over-year to $2.52 NNN, while vacancy climbed 120
basis points to 11.7% YOY. Despite this, leasing activity showed strength, rising 7.2% quarter-over-quarter and up 11.0% cumulatively compared to the 3.4M SF recorded in 2024. Net absorption reached 384,400 SF in Q4, though full-year absorption remained negative at -1.3M SF, a deeper contraction than 2024’s -290,200 SF.
Investment trends were more positive, with Q4 sales volume hitting 1.0M SF and 2025’s
cumulative total surging 59.9% to 4.7M SF. Pricing softened, as the average price per square foot for Q4 transactions was $178.43—well below the five-year average of $338.19. Meanwhile, R&D availability tightened slightly, falling 80 basis points to 12.7% quarter-over-quarter, though still up 20 basis points year-over-year.
ECONOMIC REVIEW
California’s unemployment rate edged up 20 basis points to 5.6% between June and September 2025, signaling slight labor market softening at the state level. In contrast, Santa Clara County posted a modest improvement, with unemployment declining 10 basis points to 4.5% over the same period, underscoring regional resilience despite broader economic headwinds.
Within the San Jose-Sunnyvale-Santa Clara metro, the manufacturing sector reported 121,000 jobs in September 2025, down 1.6% year-over-year. This contraction reflects ongoing rightsizing across hardware and advanced manufacturing supply chains, as companies continue to adjust operations in response to evolving global demand and cost pressures.
NEAR TERM OUTLOOK
Near-term conditions in the Silicon Valley R&D market remain defined by elevated availability, selective tenant activity, and increasing capital markets price discovery. As of 4Q 2025, total vacancy stands at 11.7%, reflecting a modest quarter-over-quarter improvement from 3Q levels, though still well above long-term historical norms. Availability continues to be driven primarily by direct space, with sublease inventory accounting for approximately 1.6 percentage points of total vacancy, signaling that most occupiers have already brought excess space to market.
4Q 2025 Silicon Valley R&D Market: Key Data Points
Explore our full Silicon Valley R&D market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Improves Slightly: Total vacancy declined to 11.7%, down 30 bps from Q3 but up 120 bps year-over-year.
- Asking Lease Rates Hold Steady: Average asking rent was $2.52 PSF NNN, a 3.8% decrease year-over-year.
- Leasing Activity Strengthens: Gross absorption reached 1.07M SF in Q4, contributing to 3.75M SF for the year, up 11% YOY.
- Net Absorption Still Negative: Q4 posted +384K SF, but full-year absorption was -1.34M SF, deeper than 2024’s contraction.
- Sales Volume Surges: Q4 sales totaled 1.0M SF, with annual volume climbing 59.9% YOY to 4.7M SF.
- Pricing Softens: Average sale price fell to $178.43/SF, well below the five-year average of $338.19.
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