MARKET DRIVERS
Asking lease rates fell 3.1% year-over-year (YOY) to $2.52 NNN.
The total vacancy rate increased 140 basis points (bps) to 11.8% YOY, with the highest increase occurring in Mountain View, climbing 120 bps to 14.4%.
Leasing activity is down 23.2% quarter-over-quarter (QOQ). Conversely, cumulative
activity is 1.8% higher than the 2.3M SF recorded through this time last year.
Net absorption was measured at -374.7K SF, bringing the total for this year to -1.5M SF. At this point last year this was recorded at -451.8K SF.
Sales volume reached 710.8K SF, cumulatively, sales volume is up 8.7%, reaching
2.6M SF. The average price per SF for these transactions is $281.19, while the 5-year
average is $358.81.
The R&D availability rate rose 80 bps to 13.6% QOQ, and 200-bps YOY. This marks the
twelfth consecutive quarter of rising availability, the highest recorded since 2Q14.
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.
San Jose-Sunnyvale-Santa Clara’s manufacturing sector reported 122.3K jobs, marking a
3.0% decrease since 3Q24, but 0.5% higher than last quarter.
NEAR TERM OUTLOOK
Silicon Valley’s R&D market recorded notable transactions this quarter with both life sciences and semiconductor players active in Sunnyvale. Thermo Fisher Scientific sold its 24,000 SF building at 490 Lakeside Drive to Realm, a real estate investment platform backed by family offices, for an estimated $6M. Realm, which invests in key innovation hubs across the country, plans to lease the single-story property, which offers high power capacity, parking, and visibility from the street. The building had been owned by Thermo Fisher since 2010 following its acquisition of chromatography systems manufacturer Dionex.
Meanwhile, Applied Materials continued to expand its Sunnyvale holdings with the $25M purchase of 999 East Arques Avenue from MetLife. The 80,000 SF industrial office property includes two buildings and is located across from the company’s under-construction EPIC Center, a 600,000 SF R&D facility. The acquisition adds to Applied’s growing cluster of properties along East Arques Avenue and Scott Boulevard, which now spans more than 10 buildings used for offices, research, and manufacturing. Applied has steadily assembled real estate in the area over the past several years, solidifying Sunnyvale as its long-term campus hub.
3Q 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 Rises: Total vacancy increased to 11.8%, up 154 basis points year-over-year, with Mountain View reaching 14.4%.
- Lease Rates Decline: Average asking lease rate fell to $2.52/SF NNN, a 3.1% decrease year-over-year.
- Negative Net Absorption: Net absorption recorded at -374.7K SF for the quarter, totaling -1.5M SF year-to-date.
- Sales Volume Up Year-to-Date: Cumulative sales volume reached 2.6M SF, up 8.7% year-over-year, with an average price of $281.19/SF.
- Availability Hits Decade High: R&D availability rate rose to 13.6%, marking the twelfth consecutive quarter of increases, highest since Q2 2014.
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