San Jose Office Market Report
2023 Investment Forecast
Robust Speculative Construction and a Slowing Economy
Sustain Upward Pressure on Local Vacancy
Net absorption remains in positive territory amid headwinds. Office usage rates in the South Bay are still well below historical levels, as the metro remains largely influenced by the tech industry workforce that continues to leverage hybrid and remote work schedules. Additionally, ongoing economic uncertainty led to the announcement of hiring freezes, layoffs and a slowdown of expansion plans from some of the region’s most notable employers, including Google, Apple and Meta. Many firms are reducing their office footprints in response to these headwinds, resulting in sublet space rising to an all-time high of nearly 6 million square feet entering this year. Still, San Jose’s office market has held up better than neighboring markets in the region, as the Silicon Valley was the only metro in the Bay Area to record positive net absorption in 2022. Moving forward, concession usage may be on the rise due to the large amount of available space, and could potentially spur more lease transactions from tenants looking to take advantage of discounted rents. However, more than half of the 3 million square feet slated to deliver this year remains unaccounted for, and will likely continue to place upward pressure on local vacancy in the near- to mid-term.