Silicon Valley Office Market
| Average FS Asking Rent (Price/SF) | $4.66 |
| Availability Rate (%) | 11.28% |
| Net Absorption (SF) | -364,215 |
The fourth quarter of 2020 brought the Silicon Valley office market its fifth consecutive quarter of negative net absorption, with negative 364,215 square feet of absorption. While this trend of negative absorption may seem discouraging for the market, this is the least negative net absorption the office market has seen this year. Overall vacancy increased by 0.6 percentage points to 11.28%, which is the smallest increase in any quarter since the fourth quarter of 2019. So while low absorption numbers and increasing vacancy rates may look like bad signals for a single quarter, both of these metrics are showing more movement towards recovery than they have shown since the beginning of the year. Office asking rates are still holding very stable, increasing $0.01/SF this quarter, to $4.66/SF. As companies are able to make more realistic long-term real estate decisions as vaccines emerge, these relatively strong numbers show promise for the office market leading into the new year.
Download Silicon Valley Office Market Report 4Q20Silicon Valley R&D Market
| Average NNN Asking Rent (Price/SF) | $2.37 |
| Availability Rate (%) | 12.57% |
| Net Absorption (SF) | -733,661 |
Silicon Valley’s R&D market saw another quarter in which many large availabilities hit the market, which kept net absorption negative for the eighth consecutive quarter. These availabilities also pushed the overall vacancy rate up by 0.35 percentage points to 12.57%, the highest it has been since 2014. While net absorption stayed below zero at negative 733,661 square feet, this number is the most positive it has been since the first quarter of the year. Gross absorption showed improvement as well, posting its highest number since the fourth quarter of 2019, with 1,742,914 square feet. This shows that the negative absorption this quarter is due to a large increase in new availability and not a decrease in overall leasing activity. The overall asking rate decreased very slightly to $2.37/SF but is still much higher than historical asking rates.
Download Silicon Valley R&D Market Report 4Q20Silicon Valley Industrial/Warehouse Market
Industrial
| Average NNN Asking Rent (Price/SF) | $1.29 |
| Availability Rate (%) | 3.96% |
| Net Absorption (SF) | 297,655 |
The industrial market closed out a turbulent year on a high note, posting a positive net absorption of 297,665 square feet, the first quarter with positive net absorption since 2018. The vacancy rate dropped to 3.96% from 4.54% in the previous quarter. Gross absorption was still strong with 662,188 square feet, although that is the lowest total of the year. This is in large part due to two leases in Fremont totaling over 150,000 square feet per transaction. Newark was the one submarket that didn’t fare well this quarter, due to over 100,000 square feet coming to the market in the submarket, while not many other new listings cropped up this quarter.
Warehouse
| Average NNN Asking Rent (Price/SF) | $1.06 |
| Availability Rate (%) | 7.26% |
| Net Absorption (SF) | 199,474 |
The warehouse market also ended the year in an encouraging way, with the second positive net absorption in a row, with 199,474 square feet. Fremont was the sole submarket with a negative net absorption this quarter, at 20,948 square feet. Asking rates jumped up $0.03/SF to $1.06/SF, a historic high for Silicon Valley. Vacancy rates in the warehouse market also dropped down to 7.26%, the lowest vacancy for the warehouse market in Silicon Valley since 2018.