The office market in Silicon Valley (California, United States) recorded a 23.1% vacancy rate in the first quarter, which represents the highest number of vacant offices in its history, according to the latest data published by Savills.
The workforce adjustments carried out by various technology companies present in the area in recent months and the advance of teleworking in the sector have had a major impact on an office market which, despite maintaining some upward indicators in annual comparison, such as hiring and rents, faces the future with great pessimism.
In the first quarter, around 93,000 square metres were signed in Silicon Valley, 28% below the average of the last five years. Although the take-up figure points to a slowdown in activity, the 93,000 sq m signed from January to March represents double the amount of space signed compared to the last quarter of 2022, which closed at 46,500 sq m, and 66% above last year's first quarter take-up, which totalled 56,000 sq m.
"The first quarter data denotes that demand for office space has declined significantly, as the technology sector continues to experience a serious correction with mass redundancies and a general freeze in office leasing," notes Savills, which also points out that many technology companies have put part of their properties on the market to take up space that they no longer contemplate occupying.
As a result of this slowdown, available space in Silicon Valley rose to 511,000 metres in the first quarter, a new all-time high. This means that vacant office space has increased by more than 84,000 square metres compared to the same period last year.
As for rents, office rents in the techie hotbed stood at an average of $54.2 per square metre at the end of the first quarter. This means that, despite the increased availability, rental prices continue to rise, with the first quarter figure 0.8% higher than the previous quarter and 6.8% higher than the same period last year.
"This is a consequence of the fact that large new office developments came to market at a high price point, although with the high availability figure, leasing activity is expected to remain low and tenant conditions are expected to be favourable during 2023 as landlords compete aggressively for occupancy," notes Savills.