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Demand for Commercial Space Drives Construction Boom

chartVacancy rates down, especially near transit

August 2, 2019 – Joint Venture Silicon Valley’s Institute for Regional Studies today released its second-quarter 2019 report on Silicon Valley commercial space. The total amount of office, industrial, and research and development (R&D) space under construction has continued to rise, even as new buildings have been completed.

Commercial space is in such high demand that there was a significant amount of speculative development of industrial space under construction at the end of the second quarter. The outlook through the second half of 2019 is expected to deliver substantial space despite relatively few large buildings completed over the past several quarters compared to the 2015-2017 period.

“Demand for all types of space, including office, industrial, and R&D, has driven this development and brought vacancy rates down, especially near public transit where rates are 67% higher,” said Rachel Massaro, Vice President and Director of Research at the Silicon Valley Institute for Regional Studies.

Key findings:

  • Commercial space under construction, at nearly 15 million square feet, is greater than any other quarter since the end of 2000: 60% office, 21% industrial, and 18% R&D. Industrial development currently underway is being built on a speculative basis, all with strong pre-lease activity.
  • Silicon Valley commercial space completions in the first half of 2019 totaled 1.68 million square feet YTD, nearly half of which was office space with one large R&D completion at 374,000 square feet following 300,000 square feet in Q1; none in the previous five quarters.
  • Asking rents for Silicon Valley office space increased steadily through the first two quarters of 2019, and are now nearly double what they were in 2010. Average rental rates within a ten-minute walk from public transit are 67% higher than at locations not-near transit.
  • The industrial space vacancy rate increased slightly in Q2 and is likely to increase through the end of the year, but remains just above the recent 18-year low. Despite the slight uptick, it remains lower than the national average due to Silicon Valley’s proximity to a skilled labor force and a strong consumer base.

The report covers trends in commercial space within Silicon Valley, encompassing San Mateo and Santa Clara Counties and the Cities of Fremont and Newark.

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For further reference:

To access Silicon Valley’s online data hub, visit www.SiliconValleyIndicators.org

Complete data release and array of charts

Download Report

About the Silicon Valley Institute for Regional Studies

The Silicon Valley Institute for Regional Studies is the research arm of Joint Venture Silicon Valley, and is housed within the organization. The Institute provides research and analysis on a host of issues facing Silicon Valley’s economy and society. 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.

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