Silicon Valley’s Office Rental Market Sluggish In Q2
USA – Data from real estate consultancy Colliers showed that Silicon Valley’s office leasing market was weak during the second quarter of the year, reported The Silicon Valley Business Journal on Saturday (16 July, SGT)
In fact, net office absorption was merely 707,000 sq ft, the lowest since Q3 2021 and was down 38 percent quarter-on-quarter. Notably, net office absorption is the amount of office space rented out, occupied, or demolished less the amount of office space completed or vacated.
The drop wasn’t due to a surplus of new office space, as less than 638,000 sq ft was completed in Q2 and that’s the lowest figure since Q2 2021. Almost all of that new office space, 595,000 sq ft to be exact, are located in Google’s Charleston East campus in Mountain View, which the search giant owns and will occupy by itself.
In 2021, office rental activity in the area were dominated by major companies, especially large tech firms. But these companies waited on the sidelines in Q2 2022, as around 87 percent of new office leases comprise workspace measuring under 10,000 sq ft.
“Large tech companies are continuing to expand, albeit at a slower pace,” explained Lena Tutko, Research Director for Silicon Valley at Colliers.
The new data comes amid an uncertain time for Silicon Valley’s office market. There’s nearly 9 million sq ft of office space under construction in the area. In addition, there are growing concerns about rising interest rates due to the high inflation, and the situation could trigger a recession that could negatively impact demand.
Moreover, the resurgence of the COVID-19 virus outbreak in the form of new variants has already compelled many businesses to adopt remote work and rethink their return-to-office plans.
Nonetheless, the office vacancy level in Silicon Valley eased to 10.1 percent in Q2 2022 from 10.6 percent in the preceding quarter. At the same time, overall office availability rate, which consists of both workspaces put up for lease by landlords and those up for sublease, declined to 14.7 percent from 15.4 percent previously.