Significant space under construction
April 22, 2020 – Joint Venture Silicon Valley’s Institute for Regional Studies today released its first quarterly report on Silicon Valley commercial space for 2020 – the first since the onset of the COVID-19 pandemic. The report shows a significant amount of new space is under construction, despite some pandemic-related delays.
Major projects underway are spread among cities throughout the region, with large projects in San Jose, Santa Clara, Mountain View, and South San Francisco. Office and R&D vacancy rates remained relatively stable into Q1, as did rental rates.
“There isn't any doubt that the pandemic will have an effect on every segment of our economy, commercial real estate included,” said Rachel Massaro, Vice President and Director of Research at the Silicon Valley Institute for Regional Studies. “While early impacts are mostly a direct result of the shelter-in-place orders from mid-March – limiting touring activity and construction progress – the longer-term effects are more uncertain right now. It’s reasonable to surmise, though, that speculative development will become less common moving forward.”
Key findings for Q1 2020
- Office and R&D vacancy rates remained relatively steady in Q1 due to the significant amount of leasing activity that was already in the pipeline before COVID-19 shelter-in-place orders. San Mateo County had a slight dip in office vacancy rates but rates in Santa Clara County increased slightly.
- Shelter-in-place orders limited touring activity at the end of the quarter; some delays in new leasing activity are expected moving forward. FAANG (Facebook, Apple, Amazon, Netflix, and Google) companies have slowed leasing as they have already secured the space needed for the near future.
- Rental rates remained relatively steady but may be vulnerable to the duration of the COVID-19 crisis.
- Permitting and building delays are inevitable given the shelter-in-place orders yet there remains a significant amount (15.8 million square feet) under construction. Major projects underway include two 600,000-square-foot built-to-suit developments in San Jose – one for Verizon Media and another for Google.
- While current projects are likely to continue with delays, speculative development will likely be put on hold until there is more certainty regarding the COVID-19 pandemic and overall economic health.
The report covers trends in commercial space within Silicon Valley, encompassing San Mateo and Santa Clara Counties and the Cities of Fremont and Newark.
For further reference
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.
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. www.jll.com/silicon-valley.