More workers have dribbled back to offices in Silicon Valley – but not for long, according to a new report.
The vacancy rate of offices across the tech hub fell to 18.4 percent in the first quarter, from 18.8 percent at the end of last year, the Silicon Valley Business Journal reported, citing a Cushman & Wakefield study.
But more offices across Silicon Valley will likely become vacant this spring, the report said.
In the first quarter, the market saw 371,100 square feet of absorption – or more space leased or occupied than vacated.
The commercial real estate trend won’t last, according to the report.
While tech companies across the region lay off thousands of workers, leading to rising unemployment, firms such as Google are reassessing the office space they’ll need in the future, Cushman said.
In addition, Jay Paul’s nearly 1-million-square-foot 200 Park office tower in Downtown San Jose is slated to be completed this quarter without yet having signed a tenant.
“Though historically more resilient than other markets nationally, the Bay Area has begun to show signs of an economic downturn,” Julie Leiker, a research manager at Cushman, said in the report.
Office vacancies in Silicon Valley were 8.7 percent in early 2020 when the pandemic hit the Bay Area, according to Cushman spokesman Josh Deale. Companies then gave up offices during the peak of the outbreak as they pivoted to remote work.
As they reopened offices, many moved to reduce their real estate footprints during a switch to hybrid work, followed by mass layoffs.
Office vacancies in Silicon Valley surpassed 18 percent last year, the highest rate since 2010 and the Great Recession, Deale said.
According to Savills, Silicon Valley’s office vacancy rate jumped to a “new historical high” of 23.1 percent during the first quarter, up from 22.7 percent during the same period last year.
The San Jose airport area, Santa Clara and Campbell had the highest vacancy rates, each topping 30 percent. South San Jose, Sunnyvale, Cupertino and the Alameda/Civic Center area of San Jose had the lowest rates, each under 10 percent.
Sunnyvale ranked first in absorption last quarter, with 468,400 square feet. Palo Alto ranked last with negative absorption of 102,400 square feet.
— Dana Bartholomew
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