Quarterly Report

Silicon Valley Commercial Space

Q3 2017

The third quarter has seen a resurgence in demand with increased tenant touring activity and large tenants showing interest in expansion. This increased demand is reflected in lower vacancy rates overall in Q3, as well as an increase in the average office space rental rate throughout Silicon Valley. But despite increased demand overall and lower average vacancy rates throughout Silicon Valley, Santa Clara and North San Jose had high (double-digit) vacancy rates in Q3 at they continued to compete for the same tenants and deal with M&A consolidations. There was an incredible amount of new commercial space completed in Q3 – more than making up for the low number of completions in the first half of 2017, and representing more new space than in any one quarter over the past 20+ years. There remains a recent scarcity of very small (<10,000 square feet) spaces available in Santa Clara County and Fremont, though, so tenants looking for smaller spaces have flocked to San Mateo County. Increasing rental rates in higher-priced submarkets like Palo Alto and Mountain View are also driving tenants north.

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