MARKET DRIVERS
Asking lease rates were flat quarter-over-quarter and rose 1.2% year-over-year to $2.53 NNN, reflecting overall pricing stability despite shifting demand dynamics. The total vacancy rate declined 20 basis points quarter-over-quarter to 11.4% and remained flat year-over-year. Leasing activity totaled 1.0M SF in 1Q26, down 32.3% from the elevated pace in 4Q25, yet still well above the 737,400 SF recorded in 1Q25. Net absorption measured 265,100 SF, indicating a moderation from the 493,600 SF absorbed in the prior quarter but a substantial improvement from the negative 1.0M SF posted one year earlier.
Investment activity strengthened during the quarter, with sales volume reaching 1.6M SF and total dollar volume climbing to $421.6M. The average price per square foot rose sharply to $322.60, up from $217.49 in 4Q25, signaling renewed investor confidence. Within the R&D segment, availability increased slightly by 10 basis points quarter-over-quarter to 12.7%, though it remains 40 basis points lower than one year ago, underscoring gradual tightening over the longer term.
ECONOMIC REVIEW
California’s unemployment rate improved 10 bps to 5.5% in December 2025, while Santa Clara County held at 4.0%, keeping the county below the statewide average entering 2026.
San Jose-Sunnyvale-Santa Clara’s manufacturing sector reported 120.2K jobs in December 2025, down from 121.0K in September and modestly below year-ago levels, reflecting continued normalization across hardware and advanced manufacturing supply chains.
NEAR TERM OUTLOOK
Near-term conditions in the Silicon Valley R&D market remain shaped by elevated but improving vacancy, selective tenant activity, and a growing divide between highly functional product and older inventory. As of 1Q 2026, total vacancy stood at 11.4%, down from 11.6% in 4Q25, while availability tightened to 12.7%. At the same time, quarterly leasing reached 1.0M SF, well ahead of 1Q25 levels, indicating that demand is still present when space aligns with specialized user requirements.
1Q 2026 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 Shows Early Stabilization: Silicon Valley R&D vacancy declined to 11.4% in 1Q 2026, down 20 basis points quarter-over-quarter and flat year-over-year.
- Availability Tightens Year-Over-Year: The R&D availability rate measured 12.7%, improving by 40 basis points from 1Q 2025 despite a slight quarterly uptick.
- Asking Rents Hold Firm: Average asking rents remained flat quarter-over-quarter at $2.53 PSF NNN and increased 1.2% year-over-year, reflecting pricing stability for well-located, specialized space.
- Leasing Activity Improves from Prior Year: Leasing totaled 1.0M SF in 1Q 2026, exceeding 1Q 2025 levels, though activity slowed from the elevated pace of late 2025.
- Net Absorption Turns Positive: Direct net absorption reached 262,000 SF, a meaningful improvement from the more than 1.0M SF of negative absorption recorded one year earlier.
- Investment Activity Rebounds: Sales volume increased to 1.6M SF with average pricing rising to $322.60 per SF, driven by investor interest in high-utility and data-capable R&D assets.
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