Low Vacancy Trend Continues in San Jose

Beginning in 2012, occupancy growth has been on a continued trend to outstrip supply. In 2019, that growth exceeded supply by a whopping 1 million square feet.

In a report published by CoStar, occupancy in San Jose grew by 2.4 million square feet, yet supply only grew by 1.4 millions square feet. This squeezed vacancy rates to a low 8.4%, which puts the Bay Area near the lowest vacancy rates in the United States. Vacancy has been below the national average since the trend began in 2012.

In addition to Silicon Valley, San Francisco and Seattle join the club with the lowest space availability. These three locations represent the three western tech hubs that have experienced growth explosions in recent years. The trend is likely to continue into 2020, as the major tech players show now signs of slowing their expansions in the foreseeable future.

San Jose and other Silicon Valley communities have seen developers scrambling to add additional capacity to address the pressure on vacancy rates. Numerous projects are expected to be completed in 2020, expanding inventory growth to exceed the last two years combined, according to CoStar. This new capacity will hardly appease demand, though, since most of the planned completions have already been pre-leased by voracious tech companies hungry for space. Net absorption is moving in lock step as new supply is added.

CoStar’s forecasts, after factoring in pre-lease commitments, that 2020 vacancy rates will remain under 10%.

Keystone Commercial Brokerage serves the needs of commercial real estate investors in the Santa Clara and San Mateo counties, specializing in land, multi-family, office, and industrial property. Paul Phangureh has over 18 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]