Silicon Valley Office Market
Absorption in the fourth quarter of 2023 totaled positive 676,054 SF, snapping a five-quarter streak of occupancy losses. Overall vacancy rate fell quarter-over-quarter from 19.5% to 18.8%, however, with net absorption measuring negative 1.1 million SF on the year, vacancy remains at a historically high level, surpassed only by the 20.1% availability rate seen in 2010. Following Walmart.com subleasing ±719,000 SF from Meta Platforms in Sunnyvale, sublease space constitutes 28.8% of all available space, down from 31.0% in the previous quarter. Asking lease rates throughout the region increased from $5.01/SF to $5.10/SF full-service quarter-over-quarter and represents an 8.3% increase year-over-year. This increase was driven by an increase in asking rents in San Jose and Santa Clara, two of the largest submarkets in the Valley.
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Silicon Valley R&D Market
Net absorption in the fourth quarter of 2023 totaled negative 282,140 SF, with year-to-date net absorption measuring negative 2.31 million SF. This is the seventh consecutive quarter of occupancy losses in the R&D sector, during which time the vacancy rate has increased from 10.3% in the second quarter of 2022 to 13.5% at the end of the year. Despite occupancy losses, R&D rents have continued to climb in the Valley, increasing to $2.96/SF, a 3.7% increase quarter-over-quarter. Life science rents continue to push this level higher despite making up a small percentage of the total inventory, such as in Fremont, which averages $2.88/SF asking rent. Annual leasing volume fell in 2023, with 7.30 million SF of gross absorption compared to 8.86 million SF in 2022, a 17.6% decrease year-over-year.
Download Silicon Valley R&D Market Report 4Q23Silicon Valley Industrial Market
Net absorption in the fourth quarter of 2023 totaled negative 71,375 SF in the industrial sector and negative 157,498 SF in the warehouse sector, for a total of 86,112 SF of positive absorption overall. Vacancy in the industrial sector rose slightly to 4.3% from 4.2% quarter-over-quarter, while the warehouse vacancy rate fell from 3.9% to 3.4%. Asking lease rates in the industrial sector increased from $1.58/SF to $1.60/SF, while warehouse asking rents rose from $1.16/SF to $1.29/SF quarter-over-quarter. Industrial and warehouse rents have consistently posted growth year-over-year for the past five years, indicating demand that has risen in step with new supply. Tenant demand remains strong in the industrial sector, with 2.3 million square feet of industrial requirements in the Valley, up from 1.6 million square feet year-over-year.