Brisk 2019 Demand for Commercial Space
According to a recent report by the Silicon Valley Institute for Regional Studies, the first quarter of 2019 is setting a brisk tempo for development and leasing. Rents are on the rise, and high demand is absorbing almost all the new space as it becomes available.
Throughout the Bay Area, more than 12 million square feet of commercial space was under construction, with the majority (around 64%) in Silicon Valley. The vast majority (around 89%) is pre-leased before the buildings are even complete, with continually decreasing vacancy rates putting pressure on availability and affordability. Rents are rising all over, but proximity to public transit garners the steepest increases.
Here are some key points from the report, published by
Joint Venture Silicon Valley’s Institute for Regional Studies :
- Q1 2019 marked a significant milestone for Silicon Valley commercial space: more space was under construction than in any quarter since the dawn of the millennium (Q4 2000). With a whopping 12 million+ square fee of space currently under construction, office space accounts for more than 64%.
- While office space vacancy rates are low all over (at an average of 13.4%), many prime submarkets are experiencing extremely low vacancy rates, between 3.7%-6.4%.
- Industrial space vacancies are at a near two-decade low of 2.7%
- Average rent for office space near public transit was 35% higher than other locations.
- Over 600,000 square feet of commercial space was completed in Q1 2019, with 69% designated as office space. Large tech companies are driving the demand, while expanding their presence in Mountain View and North San Jose. Tech start-ups are competing for smaller spaces in Palo Alto and Santa Clara.
Asking rents for office space in the Silicon Valley area are nearly double the cost of similar space in key competitor cities in Portand and Denver. However, while some firms have shifted operations to more affordable cities, the major tech giants have reaffirmed their commitments to invest in Silicon Valley, as evidenced by Google’s transit village development near Diridon Station.
While vacancy rates are on the decline, with over 12 million square feet of space in the pipeline, it is expected that vacancy rates will soften a bit as new space opens up.
Keystone Commercial Brokerage serves the needs of commercial real estate investors in the Santa Clara and San Mateo counties, specializing in commercial property, multi-unit residential, office space, and multi-use property. Paul Phangureh has over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas. Contact Paul at 650-924-2544, or email at [email protected]