Silicon Valley - San Francisco Peninsula office market reports

In Q3 2023, retail giant Walmart.com's digital unit subleased the expansive 719,000-squarefoot Moffett Green tech campus in Sunnyvale, previously leased by Meta. Walmart.com has maintained an office space at the Sunnyvale Business Park since 2014. This recent occupancy has positively impacted the market, boosting net absorption as a percentage of inventory after five consecutive quarters of negative figures. This move indicates a positive trend, suggesting that companies are recommitting to in-person work environments.

With five consecutive quarters of negative net absorption and lackluster tenant demand, asking rents have continued their decline as landlords strive to fill vacancies. In Q2 2024, the average full-service asking rent was $4.27 Full Service, a drop of 10.7% from the 2022 high of $4.73 Full Service, bringing rents back to levels seen in the first half of 2019. While concessions such as tenant improvements and free rent are sparse, landlords with second generation spaces and higher-end buildings are faring better as tenants seek deals in the market.

The overall pace of job growth has decelerated across the nation, with Silicon Valley, predominantly hosting the tech industry, experiencing a strong contraction. Consequently, the number of venture capital deals funded has also waned, and there is a direct correlation between venture activity and job postings. A major catalyst for the Bay Area’s job generation is its strong innovation ecosystem, attracting global investors. As the venture capital market picks up, we expect to see an increase in job growth, which should assist in leasing momentum.