The Silicon Valley R&D market remains at the forefront of innovation and technology, with a continued infl ow of tenants, growing venture capital funding, and increasingly high rental rates. Although the number of leases signed has jumped compared to pre-pandemic levels, average deal size has receded since the pandemic’s inception. Venture capital funding, often a measure used to gauge performance in Silicon Valley markets, has continued to demonstrate record high funding levels throughout 2021, and this trend continued in Q1 2022. Recording $13.85B in Q1 2022 compared to $5.44B in Q4 2019. Tenants continue to take new space and expand current footprints. For example, Gener8 tripled their footprint to 84,000 square feet, and Procept Biorobotics relocated their headquarters to a 158,000 square foot facility in San Jose. Rental rates have increased 2.0% overall from the previous quarter and are up 9.4% since the start of the pandemic.
Looking forward, we expect the R&D market to remain on a positive trajectory as the nature of R&D and its specialized facilities mitigates any of the potential negative impacts of remote work which are likely to affect the office market. Rental rates will continue to climb as supply remains constrained with minimal new inventory being delivered, vacancy rates continuing to decrease, and strong sales activity driven by the vision of repurposing-tired assets.
Looking forward, we expect the R&D market to remain on a positive trajectory as the nature of R&D and its specialized facilities mitigates any of the potential negative impacts of remote work which are likely to affect the office market. Rental rates will continue to climb as supply remains constrained with minimal new inventory being delivered, vacancy rates continuing to decrease, and strong sales activity driven by the vision of repurposing-tired assets.