South Bay, Peninsula office markets are far stronger than San Francisco
Office vacancies are much lower in Silicon Valley and Peninsula than S.F.
SAN JOSE — The office markets in the South Bay and San Mateo County are looking far stronger than San Francisco’s office sector, new reports from commercial real estate firm Colliers show.
The vacancy rates for office buildings in both Santa Clara County and the Peninsula are much smaller — in the range of 9% to 10% — than is the case in San Francisco — which posted an office vacancy rate of nearly 20% during the April-through-June quarter — according to the Colliers reports.
In the second quarter of this year, the office vacancy rate was 10.1% in Santa Clara County, 9.2% in San Mateo County and 19.9% in San Francisco, the reports show.
The studies suggest that tech companies still hunger for office space in both Silicon Valley and the Peninsula, but are attempting to exit offices in San Francisco in a big way.
In Santa Clara County, tenants created enough leasing activity to fill up a net of 707,200 square feet more office space than they vacated during the second quarter. As a result, the office vacancy rate of 10.1% was an improvement over the first-quarter rate of 10.6%
In San Mateo County, tenants filled up 96,700 square feet more office space than they exited in the second quarter. That helped to create a second-quarter office vacancy rate of 9.2%, down from 9.6% in the first quarter.
San Francisco office tenants, in sharp contrast, vacated 504,600 square feet more office space than they leased. That helped to shove the San Francisco office vacancy rate to 19.9% in the second quarter, which was worse than the 18.3% office vacancy level for the January-March first quarter.
Rising vacancies have spawned weakness in San Francisco’s office rents, Colliers reported.
“Asking rents decreased this quarter compared to previous quarters” in San Francisco, Colliers stated in a report. “This trend is expected to continue while vacancy is at a historic high” in San Francisco.
The reports pointed to hopeful trends for both the Santa Clara County and San Mateo County markets amid the Bay Area commercial real estate sector’s attempt to rebound from the brutal economic downturns unleashed by coronavirus-linked business shutdowns.
“A combination of pre-leased new construction and a resurgence of new activity” helped to bolster the office market in Santa Clara County during the April-June quarter, according to that region’s report, which was prepared by Lena Tutko, a Colliers director of research who focuses on the South Bay and Peninsula markets.
The upswing in Santa Clara County’s office market occurred “despite signs of an economic pullback” in the Bay Area and statewide, Tutko stated in her report.
San Mateo County office developers, buoyed by the improvement in the vacancy rate, have orchestrated a total of 6.3 million square feet of office construction on the Peninsula, according to the Colliers report.
“The Peninsula remains a thriving region in the Bay Area for the commercial real estate ecosystem,” Nicole So, a Colliers senior research analyst, stated in the brokerage’s report regarding San Mateo County.
Full article by George Avalos: https://www.mercurynews.com/2022/07/18/south-bay-peninsula-office-strong-san-francisco-weak-google-tech/