Silicon Valley R&D Market Report

The following reflects Silicon Valley R&D market conditions as of Q3 2026.

MARKET DRIVERS

Silicon Valley R&D fundamentals were mixed in the third quarter. Total vacancy rose to 11.7%, up 20 basis points (bps) from both the second quarter and the year-ago period, while direct vacancy stood at 9.8%. Total availability held at 11.6%, essentially flat with the prior quarter but 130 bps below year-ago levels. Average asking direct lease rates increased 3.4% year-over-year (YOY) to $2.71 per SF per month NNN.

Tenant demand cooled from the second quarter, with gross leasing activity totaling 729,408 SF in the third quarter. Even so, leasing volume through the first nine months of 2026 reached 3.8M SF, up 42.1% from the same period in 2025 — a sign that occupier activity remains stronger than last year despite elevated vacancy.

Net absorption stayed negative at -198,043 SF for the quarter, bringing the year-to-date total to -678,652 SF. That is a smaller loss than the -1.4M SF recorded through the same point in 2025. Investment activity also outpaced last year, with cumulative sales volume of 4.0M SF, up 16.4% YOY, and average pricing holding near $346.57 PSF — above the roughly $338 PSF five-year average.

ECONOMIC REVIEW

California’s unemployment rate held at 5.1% in August 2026, while Santa Clara County posted a lower 4.1% rate, continuing to outperform the statewide average as the labor market normalizes following prior volatility in the technology sector.

The San Jose-Sunnyvale-Santa Clara metro’s manufacturing sector added jobs, reaching 131,400 positions in August 2026, up 1.4% year-over-year. Total nonfarm employment climbed to 1.18M jobs, up 1.6% over the same period, providing a supportive backdrop for R&D and advanced manufacturing demand.

NEAR-TERM OUTLOOK

Conditions across the Silicon Valley R&D market remain mixed heading into the fourth quarter. Vacancy edged higher in the third quarter to 11.7%, while total availability ticked up slightly to 11.6%. Net absorption was negative at -198,043 SF, though the loss was considerably smaller than in the second quarter, and the year-to-date trend remains more constructive than 2025, with leasing activity up 42.1% and cumulative absorption improved by more than 760,000 SF.

Recent leasing activity shows demand concentrated among specialized technology and advanced manufacturing users. Quanta Computer leased 210,000 SF at 46859-46889 Bayside Parkway in Fremont, Sanmina-SCI Corporation took 102,772 SF at 2581 Junction Avenue in San Jose, and Ayar Labs leased 92,763 SF near Junction and Zanker avenues — underscoring the role of semiconductor, AI hardware, and technical users in current demand.

The clearest example of this shift is OpenAI’s pursuit of roughly 70,000 SF at 2950 Zanker Road in North San Jose, a facility with approximately 19 megawatts of electrical capacity. Reported negotiations exceed $6 PSF per month, more than double the average asking rent for North San Jose R&D space, illustrating how access to power is differentiating specialized facilities as AI, robotics, and advanced manufacturing users compete for energy-intensive infrastructure.

Capital markets activity remained active, though transaction volume slowed from the second quarter. Strada Investment Group acquired the 258,508 SF Vasona Med Tech Park in Campbell for $115M, or approximately $444.86 PSF. The six-building office and R&D complex traded below its 2021 purchase price, suggesting buyers are still finding value in functional technology assets when pricing reflects current conditions.

Overall, the R&D market remains uneven but shows meaningful improvement from 2025. Negative absorption and modestly higher vacancy indicate that broad-based occupancy growth has not yet returned, while stronger leasing and sales volume point to recovering activity beneath the headline vacancy figures. Power-rich, adaptable R&D facilities in core technology corridors are best positioned to capture demand from AI hardware, semiconductor, and advanced manufacturing users, while older, commodity product faces a longer path to recovery.

Frequently Asked Questions

What is the vacancy rate in the Silicon Valley R&D market in Q3 2026?

Total vacancy in the Silicon Valley R&D market was 11.7% in Q3 2026, according to Kidder Mathews research. That is up 20 basis points from both the second quarter of 2026 and the third quarter of 2025. Direct vacancy stood at 9.8% for the quarter. Vacancy has been trending gradually higher even as leasing activity has picked up (Data source: CoStar).

What is the availability rate for Silicon Valley R&D space in Q3 2026?

Total availability was 11.6% in Q3 2026, essentially unchanged from 11.4% in the prior quarter but down 130 basis points from 12.9% a year earlier. The improvement from year-ago levels suggests less space is being marketed for sublease or future vacancy relative to 2025 (Data source: CoStar).

How much leasing activity occurred in the Silicon Valley R&D market in Q3 2026?

Gross leasing activity totaled 729,408 SF in Q3 2026, according to Kidder Mathews research. Through the first three quarters of 2026, cumulative leasing volume reached 3,771,476 SF, up 42.1% from the 2,654,452 SF recorded over the same period in 2025. The year-to-date gain indicates occupier demand is healthier than last year despite elevated vacancy (Data source: CoStar).

What is net absorption, and what happened to it in Silicon Valley R&D in Q3 2026?

Net absorption measures the change in occupied space over a period; a negative figure means more space was vacated than leased. Silicon Valley R&D posted negative net absorption of 198,043 SF in Q3 2026, bringing the year-to-date total to negative 678,652 SF. That is a meaningfully smaller loss than the negative 1,439,838 SF recorded through the same point in 2025 (Data source: CoStar).

What are asking NNN rents for Silicon Valley R&D space in Q3 2026?

The average asking direct lease rate for Silicon Valley R&D space was $2.71 per SF per month NNN in Q3 2026, up 3.4% year-over-year from $2.62 a year earlier, according to Kidder Mathews research. Rates vary significantly by submarket, ranging from around $1.90 PSF in Fremont to $5.05 PSF in Palo Alto (Data source: CoStar).

How much R&D space is under construction in Silicon Valley in Q3 2026?

Approximately 1,713,660 SF of R&D space was under construction in Silicon Valley as of Q3 2026, concentrated primarily in Sunnyvale (1,027,000 SF) and Santa Clara (686,660 SF), according to Kidder Mathews research. Notable projects include Intuitive’s 847,000 SF Campus South Site in Sunnyvale and Arista Networks’ 362,660 SF build at 5200 Patrick Henry Drive in Santa Clara. There were no new deliveries in the quarter (Data source: CoStar).

What was the largest R&D sale transaction in Silicon Valley in Q3 2026?

The largest sale of the quarter was Strada Investment Group’s acquisition of the 258,508 SF Vasona Med Tech Park in Campbell from Kennedy Wilson, Inc. for $115,000,000, or $444.86 per SF, according to Kidder Mathews research. The six-building complex traded below its 2021 purchase price (Data source: CoStar).

What was the largest R&D lease transaction in Silicon Valley in Q3 2026?

The largest lease of the quarter was Quanta Computer’s 210,000 SF new lease at 46859-46889 Bayside Parkway in Fremont with landlord Prologis, Inc., signed in July 2026, according to Kidder Mathews research. It was followed by Sanmina-SCI Corporation’s 102,772 SF new lease at 2581 Junction Avenue in San Jose (Data source: CoStar).

What is the market outlook for Silicon Valley R&D heading into Q4 2026?

The outlook remains mixed but improving relative to 2025, according to Kidder Mathews research. Vacancy and net absorption are still soft, but year-to-date leasing and sales volume are both well ahead of last year’s pace. Demand is increasingly concentrated in power-rich, adaptable facilities serving semiconductor, AI hardware, and advanced manufacturing users, including OpenAI’s pursuit of roughly 70,000 SF at 2950 Zanker Road in North San Jose (Data source: CoStar).

Last updated: Q3 2026. Data source: CoStar; EDD; BLS; Silicon Valley Business Journal. Compiled by the Kidder Mathews Research Group.

Q3 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: Total vacancy rose to 11.7% in Q3 2026, up 20 bps from the prior quarter and up 20 bps YOY, with direct vacancy at 9.8%.
• Availability: Total availability held at 11.6%, roughly flat quarter-over-quarter but down 130 bps from 12.9% a year ago.
• Leasing Activity: Gross leasing activity reached 729,408 SF in Q3 2026; year-to-date volume of 3.77M SF is up 42.1% from the same period in 2025.
• Net Absorption: Net absorption was negative 198,043 SF for the quarter and negative 678,652 SF year-to-date, an improvement from negative 1.44M SF through the same point in 2025.
• Asking Rents: The average asking direct lease rate rose to $2.71 PSF/month NNN, up 3.4% YOY.
• Investment Activity: Sales volume reached 681,926 SF in Q3 2026 (4.0M SF YTD, up 16.4% YOY); the quarter’s largest sale was Strada Investment Group’s $115M ($444.86 PSF) purchase of Vasona Med Tech Park in Campbell.
• Construction Pipeline: 1.71M SF remained under construction, concentrated in Sunnyvale and Santa Clara, with no new deliveries recorded in the quarter.

Submarket Statistics

Significant Sale Transactions Q3 2026

Significant Lease Transactions Q3 2026

Significant Under Construction