MARKET DRIVERS
ASKING LEASE RATES ROSE 5.1% year-over-year (YOY) from $2.76/SF NNN in 1Q 2021 to $2.90/SF NNN in 1Q 2022.
NET ABSORPTION was 1.3 million SF for 1Q 2022. The quarter was very active with 2.1 million SF of gross absorption, almost equaling the 3 million SF of gross absorption of the second half of 2021.
R&D VACANCY RATE DECREASED 9.9% YOY from 10.4% in 1Q 2021 to 9.4% in 1Q 2022. The direct vacancy rate in Fremont decreased 19.4% YOY from 7.2% in 1Q 2021 to 5.8% in 1Q 2022. The direct vacancy rate in San Jose decreased 11.2% YOY from 10.7% in 1Q 2021 to 9.5% in 1Q 2022.
SALES VOLUME INCREASED 32.2% YOY from 771,314 SF in 1Q 2021 to 1 million SF in 1Q 2022.
ECONOMIC REVIEW
MANUFACTURING JOBS for the San Jose-Sunnyvale-Santa Clara MSA gained 5,100 jobs YOY from 166,800 jobs in February 2021 to 171,900 jobs in February 2022.
UNEMPLOYMENT in California was 5.4% for February 2022. Santa Clara County reported an unemployment rate of 2.9% during this period.
NEAR TERM OUTLOOK
INCREASING SALES VOLUMES SIGNAL large demands for R&D properties as investors and owner-users compete for a limited supply of high-quality assets. Properties with access to heavy power and lab space are especially desired.
CONVERSIONS to life science properties increase as owners chase potential higher rents from the growing requirements of biotech and life science companies.
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