Continued demand drives new occupancy in Silicon Valley
Approximately 4.9 million square feet of improved space came into the Silicon Valley market during the second quarter of 2017, according to Colliers International.
The overall leasing activity was strong in the Silicon Valley during the second quarter, gross absorption for all product types totaled 7.6 million square feet. The amount of tenant demand is a 55.9 percent increase quarter over quarter. During the second quarter 2017, the Silicon Valley measured an increase in total occupancy, at 2.7 million square feet of positive net absorption. Total availability sits just above 29 million square feet in the Silicon Valley, which translates to an overall availability rate of 8.4 percent, 88 basis points higher than one year earlier.
During the second quarter of 2017, office activity was steady in the Silicon Valley, registering a total of 4.6 million square feet of gross absorption. With the strong demand realized during the second quarter of the year, gross absorption year to date totals more than 6.3 million square feet. This amount of activity is substantially more than the 3.6 million square feet recorded during the same time period of 2016.
The Silicon Valley office market recorded another occupancy gain during the second quarter 2017, measuring 2.6 million square feet. The most noteworthy move-in during the second quarter of the year was Apple, as the firm’s newly constructed headquarters reached completion in June. The company started phasing employees into the new 2.8 million-square-foot campus in early June.
During the second quarter 2017, the total available space in the Silicon Valley office market continued to grow, totaling 10.2 million square feet. The total amount of available sublease space also continues to grow, up 8.3 percent from the first quarter 2017; available sublease space now accounts for 29.4 percent of total available space.
Available supply in the Silicon Valley is not evenly dispersed. A number of cities in the Silicon Valley, such as Cupertino, Sunnyvale and Morgan Hill, boast availability rates in the sub-5 percent range. Many others cities have less than 10 percent of their office space available and on the market for lease.
San Jose and Santa Clara have the highest overall availability rates in the Silicon Valley at 13.4 percent and 27.3 percent, respectively. The two cities combined account for just more than 40 percent of total office inventory in the Silicon Valley, and 72.3 percent of the total available space in the Silicon Valley.
Currently, more than 6.6 million square feet of office space is under construction, with total potential development reaching more than an astounding 70 million square feet in the form of proposed developments.
Speculative office space currently under construction totals more than 3 million square feet, with 2.6 million of that unspoken for. The availability rate for speculative development stood at just over 79 percent at the close of the quarter.
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