Q2 2023 Silicon Valley R&D Occupiers Guide

The Silicon Valley R&D market started to become a more tenant favorable environment quarter-over-quarter with availability rates ticking upwards to 10.9% from 10.6%. The total vacancy rate decreased 20 basis points from last quarter, dropping from 8.0% to 7.8%.  Landlords had direct vacancy rates fall from 7.0% to 6.4% during the quarter, whereas sublease vacancy rates increased from 1.0% to 1.4% over the same period.  562K SF of new sublease listings were brought to market this quarter, almost equaling the 610K SF of new direct listings.  North San Jose and Sunnyvale added the most subleases to the market with 186K SF and 107K SF added respectively. These new listings contributed towards negative 510K SF of net absorption.

Leasing activity velocity decreased to 809K SF in Q2 2023 down from 1.2 million SF in Q1 2023.  North San Jose and Fremont/Newark were the most active submarkets with 242K SF and 189K leased respectively.  If leasing activity remains low in future quarters, this could represent a cooling off of the market which should lead to more options for occupiers to choose from and increased landlord concessions.