SAN JOSE — Office vacancies in the Bay Area have ballooned to all-time highs despite some huge rental deals, a sign that tech cutbacks still haunt the region’s wobbly office market, a report released Tuesday shows.
The office availability rate soared to record levels at the end of 2023 in both Silicon Valley and San Francisco, according to a report released by Savills, a commercial real estate firm.
The sluggish state of the tech industry in the Bay Area is deemed to be the driving force behind the sky-high availability levels for offices Savills reported. The office availability rate is a combination of vacant space plus space being offered for sublease.
Silicon Valley’s office availability ended 2023 with a record high of 27.5% — which means well over one-fourth of the region’s office spaces were empty and being offered for a direct lease from a property owner or sublease from a tenant that was seeking to downsize its occupancy footprint.
San Francisco’s office available level at year’s end was far worse — an all-time high of 36.7%. This benchmark indicates that more than one-third of San Francisco’s office space was empty and being made available for lease or sublease.
The huge amount of empty and available office space in San Francisco is being driven in large part by a perceived “doom loop” of crime, homelessness and economic woes in that city.
“With return-to-office rates amongst the lowest nationally and occupier concerns about declining quality of life and safety, expect leasing activity (in San Francisco) to remain lower over the short-term, especially as the technology sector continues to right-size after years of venture capital-fueled growth,” the Savills report stated.
In Silicon Valley, the office availability rate rocketed higher despite a massive sublease deal that Walmart signed in Sunnyvale during the fall that totaled 719,000 square feet. Walmart has agreed to fully occupy a four-building Sunnyvale tech campus that Facebook owner Meta Platforms had leased but never occupied.
“Office availability (in Silicon Valley) remains at an all-time high and is expected to increase even further as return to office rates have lagged the rest of the country,” Savills stated in a report prepared by Erin Proto, the commercial real estate firm’s regional research director.