2011 Index of Silicon Valley - Silicon Valley Community Foundation

Commercial Space
Vacancy rates have slowed across
all sectors as business closings decline
and confidence builds.
PLACE
Commercial Space
Change in Supply of Commercial Space
Santa Clara County
WHY IS THIS IMPORTANT
This indicator tracks the supply of commercial space, rates of commercial
vacancy and cost, and new development, which are leading
indicators of regional economic activity. In addition to office space,
commercial space includes R&D, industrial, and warehouse space.
The change in the supply of commercial space, expressed as the
absorption rate, reflects the amount of space rented, becoming
available, and added through new construction. Gross absorption
is a measure for total activity over a period while net absorption
is the outcome. A negative change in the supply of commercial
space shows a tightening in the commercial real estate market.
The vacancy rate measures the amount of space that is not
occupied. Increases in vacancy, as well as declines in rents, reflect
slowing demand relative to supply.
Space Added/Absorbed (million sq. ft.)
20
15
10
5
0
-5
-10
-15
-20
1998
1999
2000
2001
2002
New Construction Added
2003
2004
2005
2006
Net Absorption
2007
2008
2009
*
2010
Net Change in Supply
of Commercial Space
HOW ARE WE DOING
Early reporting indicates a strong turnaround in vacancy rates in the
fourth quarter of 2010 (fourth quarter data was not available for
this analysis). Primarily driven by the decrease in new commercial
construction (down by 80 percent from 2009) and a four percent
increase in gross absorption in the past year, the amount of space
available continued to expand in 2010 (as of October) but at a
rate 59 percent slower than in 2009.
After jumping three percent in each of the preceding years, vacancy
rates across all commercial space sectors increased by just 0.5
percent from 2009 to 2010 (as of October). By sector, vacancy
rates in R&D space continued the strongest growth of 0.9 percent
while all other sectors remained relatively unchanged from the
previous year.
Across all sectors, adjusted rents declined from 2008 to 2009: R&D
(18%), Office (14%), Warehouse (9%), and Industrial (7%).
As of October 2010, 343,000 square feet of new commercial space
construction had been added in Santa Clara County. Representing
an 80 percent drop from 2009, all of this added new space was
in office space.
* As of October 2010
Data Source: Colliers International
Analysis: Collaborative Economics
25%
20%
15%
10%
5%
0%
Commercial Vacancy
Annual Rate of Commercial Vacancy
Santa Clara County
1998
2000
2001
2002
2003
2004
2005
2006
2007
2008
1999
2010
2009
*
All Commercial Space
Office
R&D
Industrial
* As of October 2010
Data Source: Colliers International
Analysis: Collaborative Economics
Warehouse
56