Vacancy up in Silicon Valley office market, but outlook remains positive

The tech sector continues to fuel the San Jose job market and boost office property fundamentals in the Silicon Valley. While the office market vacancy rate moved higher in the second quarter, tenant demand is still hot and leasing activity is expected to remain strong in the coming quarters.

Silicon Valley’s office vacancy rate climbed to 10.0 percent during the second quarter of 2019, an increase of 70 basis points (bps) from 9.3 percent in the first quarter, according to Cushman & Wakefield’s latest market report. The current rate translates to 8.3 million square feet (msf) of vacancy, up from 7.6 msf in the first quarter.

After a slow start in the first quarter of 2019, occupancy took a further step back in the second quarter as net absorption tumbled to negative 448,000 square feet (sf), down from the positive 288,000 sf recorded in the first quarter. However, the Cushman & Wakefield report states the future looks brighter as there was strong gross abs