Silicon Valley R&D Market Report

4th Quarter 2022

Posted In — Market Research | Market Report


R&D property needs continued to decrease as tenants are approaching their investments with caution, but Landlord reluctance to lower pricing was shown by the 2.8% QOQ increase in asking lease rates to $3.25/SF NNN.

Gross absorption dropped 38.5% YOY from 1.5 million SF in 4Q21 to 900k SF in 4Q22, illustrating continued tenant decreases for SF requirements.

There has been a substantial QOQ reduction in total net absorption with over 1 million SF in 3Q22 and 474k in 4Q22 coupled with a smaller YOY reduction of 109k SF.

The market wide vacancy rate decreased, for the fourth consecutive quarter, by 22.6% YOY to 7.8% in 4Q22. Cupertino, Mountain View, Palo Alto, and Fremont had the lowest rates, all with a rate below 5%. Campbell continued to have the highest vacancy rate at 14.4%, a 20% increase from 3Q22.

Sales volume fell 84% YOY from 2.2 million SF in 4Q21 to 347k in 4Q22 and 49.8% QOQ from 692k SF in 3Q22.

R&D Availability decreased both YOY and QOQ by 13.2% and 9.2%, respectively.


Santa Clara County’s unemployment rate slightly increased to 2.3% but remained notably lower than California’s total, which climbed to 4%.

San Jose-Sunnyvale-Santa Clara manufacturing sector increased from 171,600 jobs in November 2021 to 176,200 jobs in November 2022, a 2.7% YOY increase.


While the R&D sector has shown more resilience than other product types during recent downturns, recent tech layoffs are having a significant impact during this cycle. For example, Seagate recently laid off 8% of their global staff in late 2022 and is now looking to sell their 575,000 SF campus in Fremont.

Amid economic slow-down, the R&D market is showing the effects of companies right-sizing and reducing requirements with decreased vacancy rates, availability rates, absorption, and sales volume in 4Q22 despite its steadiness during the pandemic.

Starting in 2023, small businesses can use the Inflation Reduction Act’s refundable research and development tax credit to reduce payroll taxes and other business expenses by up to $500,000 annually. This is $250,000 more than the previous credit and could provide a needed boost to R&D startups.

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