San Jose Office Market Report

Silicon Valley displays resiliency. Entering the second quarter, office vacancy in San Jose was at 16.6 percent, the lowest rate among Bay Area metros. Although this measure is above the pre-pandemic level, it still remains below the previous peak that occurred after the Global Financial Crisis. Large move-ins from firms like ByteDance and KLA-Tencor helped push net absorption to nearly 1.8 million square feet over the past four quarters ending in March, the third-largest total among major U.S. markets, indicating there is still solid demand for office space. While this recent momentum is encouraging, Silicon Valley will face some headwinds in the near-term. Office utilization rates in San Jose are among the lowest in the country, even trailing neighboring San Francisco. Uncertainty regarding return-to-office policies, layoffs in the tech sector, and struggles in the banking industry may further moderate demand for office space in the short-run while recessionary fears remain.