SAN JOSE — Commercial leasing activity jumped in Silicon Valley during the third quarter of 2025 and development activity rose at a modest pace as owners of commercial properties scout for an elusive market rebound, a new report shows.
Santa Clara County, San Mateo County, and Fremont commercial property leases totaled 20.4 million square feet during the July-through-September third quarter, according to a report from the Silicon Valley Institute for Regional Studies that was released in partnership with JLL, a commercial real estate firm. The institute is the research arm of Joint Venture Silicon Valley.
The pace of commercial leasing in the third quarter was 48.9% higher than the 13.7 million square feet that was leased in the April-through-June second quarter of 2025, the report from the Institute for Regional Studies and JLL determined.
The survey defined commercial spaces as office, research, industrial, and laboratory buildings. Retail was excluded.
Completed commercial development projects in Silicon Valley totaled 5.61 million square feet in the third quarter for commercial spaces in Silicon Valley. That was up 5.5% from the 5.32 million square feet of completed development in the second quarter, according to the report.
The report arrives on the heels of big leases in downtown Sunnyvale by Databricks and Crowdstrike that greatly bolstered the Silicon Valley market. These deals filled up hundreds of thousands of square feet of space.
Plus, a new office building in the Santana Row neighborhood in west San Jose has also turned into a success story by attracting a steady stream of leasing deals.
Vacancy rates for all commercial buildings rose throughout Silicon Valley, in a weak indicator for the market, according to the report.
“While the region’s office vacancy rate fell slightly from a record-high of 23% in the second quarter to 22.2% in the third quarter, it remained more than double its 2019 average and above peak levels of the dot-com bust,” the report stated.
Laboratory spaces, once deemed a darling of the commercial property sector in the post-coronavirus era, reached a vacancy rate of 37%. This reflects a boom in the development of labs, but demand hasn’t sufficed to fill the empty lab spaces.
Rents for commercial spaces are also showing signs of weakness, according to the new report.
“Inflation-adjusted asking rents continued to decline through Q3 2025, falling 7% from 2024 levels to their lowest average rate in a decade,” the report stated.
In the wake of the coronavirus outbreak, the uneven return to the office throughout the Bay Area has helped to keep office vacancies relatively high and rents in a sluggish state.
“No new office space was completed in Silicon Valley in the third quarter of 2025,” the report stated. “However, 1.74 million square feet of office space have been completed since the beginning of 2025, already surpassing 2024 annual totals.”
Tenants filled commercial property spaces at a slightly greater amount than the sites they vacated, dynamics that produced positive net absorption of commercial space in Silicon Valley, according to the report.
“This suggests a modest increase in tenant demand,” the report stated.