The Insider | May 2015

R&D

The Silicon Valley R&D sector measured robust levels of activity during the first quarter of 2015. Measuring 2.42 million square feet of gross absorption, this is 15.1% less than the 2.86 million square feet recorded the prior quarter but up 28.1% from one year earlier. While R&D demand decreased during the first quarter, occupancy levels increased, demonstrating that less space was returned to the market during the quarter. The R&D sector recorded 770,836 square feet of net absorption, kicking off the year with a strong start.

OFFICE

During the first quarter of 2015 office activity was strong in the Silicon Valley, registering a total of 2.65 million square feet of gross absorption. As anticipated, the Silicon Valley office market recorded another occupancy gain during the first quarter, measuring 1.02 million square feet. This is the eleventh straight quarter that the office market has recorded positive net absorption. The office market measured a 17.2% increase over the occupancy gain from the prior quarter and more than three-fold the 294,650 square feet measured during the first quarter of 2014.

INDUSTRIAL

It was a modest quarter for the Silicon Valley’s industrial sector. Activity was up less than 1% from the previous quarter, measuring 824,519 square feet of gross absorption. Despite the slight increase in activity, the industrial sector closed the first quarter with 77,481 square feet of negative net absorption, now the second straight quarter that the industrial market has returned marginal amounts space back to the market. As anticipated, it will be tough for the industrial market to see large occupancy gains quarter-over-quarter if the amount of available space on the market remains at historically low levels.

WAREHOUSE

Activity in the Silicon Valley warehouse sector was up 69.3% during the first quarter of the year, recording 1.37 million square feet of gross absorption. As a result of the increased demand, the warehouse sector recorded 677,678 square feet of net absorption, putting to bed a two quarter streak of occupancy loss. Contributing to this increase was the completion and occupancy of Overtone Moore’s newly constructed warehouse project, which was 100% leased prior to completion.