Q1 2020 Silicon Valley Occupier's Guide - Office

The first 10 weeks of Q1 2020 were business as usual, with vacancy
rates, net absorption, and rental rates remaining essentially flat from
Q4 2019. However, with the onslaught of COVID-19 hitting the country
in early March, and aggressive shelter-in-place orders taking effect in
the Greater Bay Area in the middle of the month, much of the local
economy has ground to a halt. The tech-heavy NASDAQ Composite
Index remains largely unchanged on a year-to-date basis, but top
Wall Street investment banks are forecasting double-digit U.S. GDP
contractions for Q1 2020. With the shelter-in-place orders currently
extending through May 2020, and perhaps beyond, most Silicon Valley
landlords are waiting to survey the “post shelter-in-place” landscape
before adjusting rental rates or concessions offered to tenants.
Consistent with what we have seen in past recessions such as the
correction following the Dot Com Boom in the early 2000’s and the
Great Recession in 2008-2009, we expect to see rental rate declines
lag the expected macroeconomic contraction by 1-4 quarters.