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Silicon Valley's Tight Office Market to Drive Companies North, East

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Silicon Valley's tight office market might drive companies north and into the East Bay, a new report from Savills Studley finds.

Overall vacancy was 8.7% for Q3, down 2.4 percentage points from a year ago, the commercial brokerage reports. Class-A vacancy was 8.8%, down 1.2 percentage points from a year ago. Vacancy was 1.4% in Palo Alto for the third quarter and 2.3% in Mountain View and Los Altos, giving many companies few options in those prime locations.

Rents, on the other hand, declined from last year, with the average asking rent of $3.24/SF down nearly 1%. Even with that slight decline, it remains a landlord's market, according to The Registry.

While the report looked at leasing activity (which was down 23.8% from last year due to less space available), it also mentioned companies buying and developing space, such as Apple's North San Jose property where the company could build a campus of up to 4.15M SF.

Apple's presence in North San Jose could lure other companies in that direction as well, the report says. North San Jose had an office vacancy of 18.2% in Q3, down 1 percentage point from last year.

Rents are expected to continue to rise in the top markets around Silicon Valley in 2016, and vacancy rates will fall in tertiary markets such as North San Jose, Milpitas and Fremont. [TR]

Related Topics: Savills Studley