After an encouraging 2024, the Silicon Valley office market entered 2025 with modest yet positive momentum. Vacancy remained essentially unchanged quarter-over-quarter (QoQ) for the third consecutive quarter. Occupancy gains in North San Jose, Santa Clara, and Mountain View were offset by losses in Sunnyvale. Year-over-year (YoY), vacancy remained essentially flat, rising slightly by 0.3%. Availability increased 0.5% QoQ but remained flat at 20.6% YoY. Average asking rents recorded a decline of 1.7% or $0.09 QoQ, with an annual reduction of $0.17. However, Class A rents increased by $0.12, or 2.2%, QoQ, indicating that the post-Covid flight to quality continues. Net absorption remained positive at 69K SF for the quarter, continuing the momentum from 2024, which saw 532K SF of positive net absorption.
Despite some encouraging indicators, optimism regarding trends in the Silicon Valley office market remains cautious. Unlike prior quarters, return-to-office (RTO) mandates have resulted in an uptick in utilization rates. However, many legacy tech firms continue consolidating, putting upward pressure on vacancy. Additionally, landlords of campuses that once looked for a single anchor tenant are finding success by subdividing space to welcome a wider mix of user sizes.
Despite some encouraging indicators, optimism regarding trends in the Silicon Valley office market remains cautious. Unlike prior quarters, return-to-office (RTO) mandates have resulted in an uptick in utilization rates. However, many legacy tech firms continue consolidating, putting upward pressure on vacancy. Additionally, landlords of campuses that once looked for a single anchor tenant are finding success by subdividing space to welcome a wider mix of user sizes.