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anta Clara County’s commercial real estate under construction fell to 4.5 million sq ft, a 45 % drop from the end of 2024 and 79 % below its 2021 peak—the lowest level since 2013—per Joint Venture Silicon Valley’s latest quarterly report. Despite the shrinking pipeline, the first nine months of 2025 saw a record 5.6 million sq ft of new office and industrial space completed, the fastest growth since 2021. Commercial leasing reached 20.4 million sq ft in the first three quarters, putting the year on track for the highest annual volume since 2018. Vacancy rates eased slightly to 22 % from 23 % in Q2, yet remain more than double the 2019 pre‑pandemic rate and exceed the dot‑com bust highs of the early 2000s.

    “Silicon Valley has a split personality right now,” said land‑use consultant Bob Staedler, noting the report confirms on‑ground observations. Staedler added that the market is not in crisis and property values are stable, but the high vacancy rate is curbing new construction. President and CEO Russell Hancock attributed the slowdown to inflation and policy uncertainty, warning that investors are reluctant to make large bets.

    Both Staedler and Hancock anticipate a gradual recovery driven by emerging sectors such as artificial intelligence and a return to office work, with some older office buildings likely to convert to multifamily housing. Alexander Quinn of JLL highlighted early signs of inventory turnover beginning in Q1 2024. Last year, office buildings accounted for only 22 % of new commercial construction in Silicon Valley, down from 55 % over the previous four years, while lab and industrial space now represents more than two‑thirds of new development, fueled by growth in life sciences and advanced manufacturing. Robotics and drone makers are cited as key drivers of this shift, leveraging Silicon Valley’s unique blend of hardware, software, and AI talent.