Silicon Valley Commercial Office Space for Rent

Q4 2025

Silicon Valley Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Silicon Valley commercial real estate (CRE) market is navigating a complex period of "recalibration" as 2025 draws to a close [2]. The Office sector continues to grapple with high vacancy, though leasing activity is showing signs of stabilization driven by AI and tech demand [1, 2]. Industrial fundamentals remain robust, with steady demand for warehouse and R&D space despite a slight uptick in vacancy [4, 5]. Retail is a bright spot, benefiting from strong demographics and limited new supply, while Multifamily is tightening as construction activity slows [3, 7].

TenantBase Proprietary Data [12] highlights the distribution of active tenant demand over the last 90 days (189 total deals):

  • Retail/Storefront dominated market activity with 57.14% of all searches [12].
  • Warehouse was the second most active sector at 32.28% [12].
  • Office accounted for 11.11% of total search volume [12].

Office Market

Market Overview Silicon Valley's office market is slowly stabilizing, with leasing activity picking up after a prolonged period of sluggishness. A "flight to quality" remains the dominant trend, with tenants consolidating into premium spaces [1, 2].

  • Vacancy & Availability: The overall vacancy rate stands at 23.3% in Q3 2025, with availability slightly higher due to sublease space [1]. However, Class A vacancy in prime submarkets like Palo Alto and Mountain View is tighter, reflecting stronger demand [2].
  • Net Absorption: Net absorption remained negative in Q3, driven by large corporate downsizings [1]. However, smaller tenants are active, particularly in the <5,000 SF range [12].
  • Rental Rates: Asking rents have softened to $4.85 per SF (Full Service), with landlords offering significant concessions to attract tenants [1].
  • Market Drivers: AI companies are a major driver of new demand, accounting for a growing share of leasing activity [2]. TenantBase data shows a preference for shorter lease terms, with 47.06% of office inquiries seeking leases of Less than one year [12].

TenantBase Activity [12]

  • Demand Share: Office accounted for 11.11% of total search volume [12].
  • Lease Term Preference: Demand is skewed towards short-term flexibility:
    • Less than one year: 47.06% of deals [12].
    • 5+ Years: 23.53% of deals [12].
    • 3-5 Years: 17.65% of deals [12].
  • Size Requirements: The average lower size requirement for office space is 750 SF for short-term leases, increasing to 2,750 SF for 5+ year terms [12].

Industrial & Warehouse Market

Market Overview The Silicon Valley industrial market remains resilient, supported by diverse demand from logistics, manufacturing, and R&D users.

  • Vacancy & Rent: Vacancy has ticked up slightly to 4.8% due to new deliveries, but remains healthy compared to historical averages [4]. Asking rents are stabilizing after years of rapid growth [5].
  • Demand & Supply: Leasing activity is steady, with a mix of renewals and new leases driving demand [4]. The construction pipeline is active, particularly for R&D product, which accounts for a significant portion of new supply [5].
  • Leasing Highlights: TenantBase data indicates strong demand for mid-term leases, with 3-5 Years being a popular choice for warehouse users [12].

TenantBase Activity [12]

  • Demand Share: Warehouse accounted for 32.28% of total search volume [12].
  • Lease Term Preference: Demand is spread across lease terms:
    • 1-2 Years: 32.26% of deals [12].
    • 3-5 Years: 25.81% of deals [12].
    • 2-3 Years: 19.35% of deals [12].
  • Size Requirements: The average lower size requirement for warehouse space is 3,000 SF for 3-5 year terms [12].

Retail Market

Market Overview Silicon Valley's retail sector is performing well, driven by affluent demographics and a lack of new construction.

  • Vacancy & Availability: Retail vacancy is tight at 4.2%, with availability limited in high-traffic corridors [3].
  • Rental Rates: Rent growth is positive, with asking rents rising 2.8% year-over-year [3].
  • Construction: New retail development is minimal, which is supporting occupancy levels and driving competition for existing space [3].

TenantBase Activity [12]

  • Demand Share: Retail/Storefront activity dominated with 57.14% of all search volume [12].
  • Lease Term Preference: Retail tenants show a clear preference for stability:
    • 5+ Years: 38.10% of deals [12].
    • 3-5 Years: 23.81% of deals [12].
    • 2-3 Years: 16.67% of deals [12].
  • Top Locations: Tenant interest is highest in San Jose (30 deals), Mountain View (11 deals), and Santa Clara (8 deals) [12].

Multifamily Market

Market Overview The multifamily market is stabilizing as it absorbs a wave of new supply, with fundamentals expected to improve in 2026.

  • Vacancy & Occupancy: Vacancy is estimated at 5.5%, slightly elevated due to recent completions but trending downward [6].
  • Rents: Rent growth has moderated to 1.5% year-over-year, averaging $3,150 per unit [7].
  • Construction: The construction pipeline is thinning, with starts down significantly from their peak, setting the stage for tighter conditions ahead [7].
  • Investment: Sales activity remains muted due to high interest rates, but investor interest in core assets remains strong [6].

2026 Outlook

Looking ahead to 2026, the Silicon Valley market is positioned for gradual recovery and growth.

  • Tech Rebound: A rebound in tech hiring and IPO activity is expected to drive office demand, particularly for Class A space [2].
  • Industrial Strength: The industrial sector will continue to benefit from e-commerce and advanced manufacturing growth, with rents projected to rise [5].
  • Housing Demand: Limited housing supply and strong job growth will support multifamily fundamentals, leading to renewed rent growth [7].

Sources

  1. CBRE: Silicon Valley Office Figures Q3 2025
  2. Newmark: Silicon Valley Office Market Overview Q3 2025
  3. Marcus & Millichap: San Jose Retail Market Report Q3 2025
  4. CBRE: Silicon Valley Industrial Figures Q3 2025
  5. Newmark: Silicon Valley Industrial Market Overview Q3 2025
  6. Yardi Matrix: San Jose Multifamily Market Report – October 2025
  7. Marcus & Millichap: San Jose Multifamily Market Report
  8. Colliers: Silicon Valley Office Market Report Q3 2025
  9. Cushman & Wakefield: Silicon Valley Office MarketBeat Q3 2025
  10. Kidder Mathews: Silicon Valley Office Market Report Q3 2025
  11. Savills: Silicon Valley Office Market Report Q3 2025
  12. TenantBase Proprietary Market Data (Silicon Valley - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.