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Q2 2013 - Finding Its Balance

San Jose Silicon Valley ReportThe economy as a whole continues to cautiously move forward. There are some sectors, though, where talk of recovery is becoming unnecessary. Home prices are at pre-recession levels in many parts of the country, and have even surpassed those levels in some areas locally. The stock markets have surpassed their pre-recession records. The most recent blip in the stock markets’ climb was talk of the Federal Reserve Board ending its third round of quantitative easing due to the strength of economic indicators. The number of people employed in the San Jose area continues to grow and is the highest it has been since 2001, welcome news for the area’s commercial real estate market.

New leasing and user sale activity during the second quarter of 2013 increased 23.3% over the previous quarter to register 6.10 million square feet. This amount of gross absorption is the highest since the third quarter of 2011, and is also the first time activity has crossed the 6.0 million-square-foot threshold since then. While gross absorption dipped in the industrial sector during the quarter, the office, R&D and warehouse sectors each reported increased activity of at least 24% over the previous quarter. The Silicon Valley’s office and R&D sectors accounted for 80.9% of all new activity.

The second quarter benefited from another decrease in pre-improved, rollover space being vacated. In total, 3.43 million square feet of space was vacated during the quarter. This is a decrease from the first quarter’s already-low number, and it is the third straight quarter in which rollover space coming to market has dropped. The rate at which space is being vacated is now less than one-half the rate it was during the recession dump.

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