Silicon Valley’s office market cooled slightly during the first quarter of 2017. Pre-lease activity in suburban Silicon Valley areas was down, leading to higher vacancy rates. Office vacancy rates increased to 13.3% in Q1 2017, up from 11.5% in Q4 2016, according to a report from the Silicon Valley Institute for Regional Studies in partnership with JLL.

Asking rents decreased to $4.06/SF during last quarter compared to $4.21/SF in Q4 2016, but rents remain higher than the roughly $2.50/SF asking rents in 2010. Demand for large space is down. Tech companies are continuing their growth at a slower pace than 2015-2016. Large space leasing was strong in Silicon Valley and San Francisco with Uber, Slack, Cavium and Accenture taking space of more than 100K SF.

The story is a little different among high-demand transit-oriented sites. Offices near transit reported lower vacancy rates of 8.2% compared to the 10.7% vacancy rate for offices not near transit. Rents for space near transit was $5.04/SF compared to the $3.75/SF not close to transit.

Last quarter, 15.5M SF of office was under construction with 46% pre-leased. Tech companies made up 75% of this pre-leased space, or 5.3M SF. Of the seven office projects to deliver last quarter, only two were not fully pre-leased at the time of delivery. Those included Rockwood Capital’s 260K SF development at 237 Moffett Park Drive and Deutsche AWM’s 85K SF Menlo Park development at 80-85 Willow Road.