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December 3, 2023
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San Jose Ranked No. 1 for Office Development Opportunity


This report was provided by real estate services firm CBRE

San Jose offers the most favorable market for office construction in the U.S., according to CBRE’s U.S. Development Opportunity Index. While the metro secured the 17th overall spot on the inaugural list, it is top-ranked for office development opportunities. San Jose also ranks ninth for retail, 20th for multifamily and 46th for industrial.

The report, which analyzed the top 50 U.S. markets by population, scored markets based on four performance categories: construction costs, fundamental strength of existing supply, prior cycle performance and property forecast.

“San Jose represents the urban heart of Silicon Valley. It combines one of the nation’s deepest talent pools with a spacious environment, desirable climate and a community of cultural and retail offerings. Companies appreciate that a San Jose location is accessible to a wide swath of top-tier talent and affords room for growth,” said Mark Schmidt, senior managing director of CBRE’s Silicon Valley office.

San Jose is expected to have the fastest-growing economy post-recession, driven by an unparalleled high-tech ecosystem that takes advantage of research universities, abundant capital, and a strong entrepreneurial culture. The significant tech presence in San Jose has driven up construction and land costs, with only San Francisco ranking higher on the cost index across all product types.

San Jose’s top ranking for office construction was helped by its balanced supply pre-pandemic. The market’s office inventory has increased steadily since 2010, and strong preleasing for office buildings under construction (62%) points to a fundamentally healthy future for new additions. The region’s retail and multifamily development were also ranked among the top five markets for projected future demand. Overall, the industrial & logistics market in San Jose struggled comparatively, with a low ranking due to high costs and the strength of industrial supply in the market.

U.S. construction activity is expected to pick up in 2021, after a slowdown in 2020 due to challenges brought by COVID-19, including temporary work stoppages and difficulty sourcing various materials from abroad. Since the start of the pandemic, momentum has varied among commercial real estate sectors – development progressed in the multifamily and industrial & logistics sectors, but activity slowed—and in some cases stalled—for retail, hotels and speculative office development.

“We expect to see a significant uptick in tenant fit-out projects in 2021 as employers redesign and reconfigure spaces to accommodate new standards in health, wellness and safety,” said Jim Dobleske, CBRE global president of Project Management. “Costs, however, aren’t likely to change much; markets with high costs of land and labor won’t get much cheaper, if at all.”

CBRE’s Development Opportunity Index ranks markets based on development conditions including property performance in each of the major commercial real estate sectors, construction costs, strength of supply, prior performance and forecast performance.

CBRE OFFICE Development Opportunity Index - Top Markets of 2020

Market Score -- Market Score

San Jose – 84.67
Phoenix – 83.89
Raleigh – 83.06
San Francisco – 82.33
Boston – 81.94
Austin – 81.72
Atlanta – 81.44
Seattle – 81.33
Orlando – 81.22
Dallas – 80.67

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