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Institute Report: Commercial space construction boom continues; industrial vacancy rates at 18-year low

Commercial Space 2018 Q3 report coverOctober 22, 2018 – The surge of commercial space development in Silicon Valley continued unabated in the third quarter of 2018, with more than ten million square feet of new space under construction and the industrial space vacancy rate at an 18-year low of 2.6 percent, the Silicon Valley Institute for Regional Studies reported today.

The Institute’s latest quarterly commercial real estate report, prepared in partnership with JLL Silicon Valley, shows that more than three million square feet of newly constructed office and industrial space was delivered to the market this year, a third of that total in Q3 alone.

Included in that number were three major projects: Landbank’s 777,000-square-foot Central and Wolfe campus in Sunnyvale, entirely released to Apple, and two large developments on Park Boulevard in Palo Alto. The larger of those, a 36,000-square-foot Jay Paul project, was preleased to Chinese tech company Tencent.

“The pace of new commercial development in Silicon Valley remains brisk, rivaling that of the tech boom in 2001,” says the report. “Nearly three-quarters of the in-progress developments throughout the Bay Area are in Silicon Valley.”

While Silicon Valley’s industrial space vacancy rate is the lowest since 2000, the report noted, office space vacancy has risen dramatically this year (up 4.2 percentage points to 17.9% in Q1-3 2018). This relatively high vacancy rate is influenced by continued M&A and consolidation activity, primarily in the hardware sector in North San Jose, as well as occupancy losses in the airline and finance industries in central San Mateo County (including space released by Visa, MasterCard, and Virgin Airlines).

Office vacancy rates remain low in prime submarkets such as Palo Alto, Redwood City, Menlo Park, Mountain View, and Sunnyvale.

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About the Silicon Valley Institute for Regional Studies

The Silicon Valley Institute for Regional Studies provides research and analysis on a host of issues facing Silicon Valley’s economy and society. The Institute is housed within Joint Venture Silicon Valley. For more information, visit www.siliconvalleyindicators.org.

About Joint Venture Silicon Valley

Established in 1993, Joint Venture provides analysis and action on issues affecting the Silicon Valley economy and quality of life. The organization brings together established and emerging leaders—from business, government, academia, labor and the broader community—to spotlight issues, launch projects and work toward innovative solutions. For more information, visit www.jointventure.org.

About JLL Silicon Valley

JLL is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com/silicon-valley.

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