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October 27, 2021
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Third Quarter 2021 Silicon Valley Office Sales Hit Their Highest Level in Two Years

10/11/21

This update was provided by real estate services firm Kidder Mathews

Silicon Valley Office CRE Market Update – 3rd Qtr. 2021

MARKET DRIVERS

• Asking lease rates rose 3.4% year-over-year (YOY) to $4.84/SF full service.
• Sales volume was at 2.5 msf, the most active quarter in the last two years. This more than quintupled last year’s 416.4k sf for 3Q 2020.
• Vacancy rates jumped 27.3% YOY from 10.5% in 3Q 2020 to 13.4% in 3Q 2021.
• Gross absorption declined 7.1% YOY from 1.1 msf to 1 msf.
• There is currently 6.7 msf of office development in the construction pipeline.

ECONOMIC OVERVIEW

• Unemployment in California stood at 7.5% for August 2021. Santa Clara County recorded an unemployment rate of 4.8% during this period.
• The civilian labor force for the San Jose-Sunnyvale-Santa Clara MSA grew 1.5% YOY to 1.1 million workers. The professional and business services sector grew 2.9% YOY to 243,500 jobs.

NEAR-TERM OUTLOOK

• Tenants are preferring short term deals to evaluate their office space needs during the pandemic. Mid-size companies and startups may be more inclined to have their employees work from home while large cap companies can wait out the pandemic with longer term renewals.
• Investors are showing faith in Silicon Valley’s economy by snapping up trophy office properties. Three buildings in the new 657.9k sf Coleman Highline project are set to close at the end of 2021 for $775 mil ($1,178/sf). The buildings are preleased to Yahoo.

MARKET HIGHLIGHTS

• Asking lease rates are at $4.84/sf full service.
• Sales volume was at 2.5 msf.
• There are currently 6.7 msf of office projects under construction.


Source: CoStar; State of California Employment Development Department





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