A
ccording to Joint Venture Silicon Valley’s latest quarterly report, the commercial real estate market in Silicon Valley is a paradox. In the first nine months of 2025, developers added 5.6 million sq ft of new office and industrial space – the fastest growth since 2021 – yet the pipeline of work‑in‑progress fell to 4.5 million sq ft, a 45 % drop from the end of 2024 and 79 % from the 2021 peak, the lowest level since 2013.

    Leasing activity in the first three quarters reached 20.4 million sq ft, putting the annual volume on track for the highest since 2018. Vacancy rates eased slightly to 22 % from 23 % in Q2, but remain more than double the 2019 pre‑pandemic level and exceed the highs of the early‑2000s dot‑com bust.

    “Silicon Valley has a split personality right now,” said land‑use consultant Bob Staedler. “This report just confirms what we’re seeing on the ground.” Staedler added that the market is not in crisis and property values are stable, but the shrinking construction pipeline reflects vacancy rates that are twice the normal range.

    President and CEO Russell Hancock noted that inflation and policy uncertainty are dampening investment. “In uncertainty, no one wants to invest,” he said. He expects a gradual recovery driven by emerging sectors such as artificial intelligence and a return to office work, with some older buildings converting to multifamily housing.

    Senior director Alexander Quinn of JLL, who co‑authored the report, highlighted a shift in new construction: office buildings now account for only 22 % of new commercial projects, down from 55 % in the previous four years, while lab and industrial space now makes up more than two‑thirds of new development due to rapid growth in life sciences and advanced manufacturing. Robotics and drone makers are cited as key drivers of this demand, thanks to Silicon Valley’s unique blend of hardware, software, and AI talent.

    The report also notes that while inventory remains high, a turnaround began as early as Q1 2024. For more information, contact Mike Langberg at [email protected].