Sky-high office vacancies continue to haunt the downtown districts of San Jose, Oakland and San Francisco, an economic malady that has left at least one-fourth of the office space empty in all three urban cores.
While some glimmers of hope have emerged for the central business districts of the three cities, their vacancy rates remain at brutally high levels, according to a new report from Colliers, a commercial real estate firm.
The report that Colliers provided to this news organization determined that the improvements were mixed with some downbeat trends.
Here are some highlights from the Colliers report, which covers the latest statistical period available, the January-through-March first quarter of 2025:
— In the January-through-March first quarter of this year, downtown San Jose had the highest office vacancy rate among the urban cores of the three cities, while downtown San Francisco experienced the second-highest vacancy rate, while downtown Oakland had the lowest vacancy rate.
— Downtown San Jose posted a first-quarter office vacancy of 30.6%, which was worse than the 30.2% vacancy rate in the first quarter of 2024 but lower than the 31% vacancy rate in the October-through-December fourth quarter of 2024.
— Downtown Oakland reported a vacancy rate of 26.5% in the first quarter of 2025, which was higher than the 20.5% rate in the first quarter of last year and also worse than the 25.9% vacancy in the fourth quarter of 2024.
— Downtown San Francisco experienced a vacancy rate of 29.6% in the first quarter of 2025, higher than the 28.2% office vacancy in the first quarter of 2024 and unchanged from the fourth quarter of 2024, Colliers reported.
One bottom line from the three reports: Only downtown San Jose showed some tiny improvement, while downtown Oakland suffered worsening conditions and San Francisco failed to improve office vacancy levels.
“Most deals signed in downtown San Jose were relatively small, that is, less than 25,000 square feet,” Derek Daniels, Colliers regional research director for the Bay Area, wrote in an email to this news organization regarding the report on the three downtowns.
Downtown San Jose, which Colliers calls the central business district for Silicon Valley, nevertheless takes a back seat to much smaller cities in terms of attracting office leases, Colliers determined.
“Unlike other metros, downtown San Jose is not considered the most premier market,” Daniels said.
Downtown San Jose rents are lower than premier Silicon Valley office markets such as Palo Alto and Mountain View, according to the Colliers report. In addition, vacancy rates are higher in downtown San Jose than in top-tier markets such as Palo Alto and Mountain View, the real estate firm reported.
Other office markets are grabbing a larger share of the South Bay office rental deals than downtown San Jose, Colliers reported.
In 2024, including new leases, subleases and renewals, downtown San Jose captured 3.6% of the deals, according to Colliers. Markets such as central Palo Alto landed 6.5% of the office rental transactions, and central Mountain View landed 8.2%.
“Oakland’s central business district remained under pressure in the first quarter of 2025, continuing a trend of elevated vacancy seen across the broader market,” Colliers reported. “Leasing activity was limited and largely driven by small renewals and short-term commitments.”
Tenants are in the middle of a wide-ranging assessment of their space requirements in downtown Oakland, Colliers reported.
“Leasing activity was concentrated among small-space occupiers, particularly in the non-profit, legal, and financial sectors” in downtown Oakland, the Colliers survey stated.
Overall in the first quarter, however, tenants were taking a wait-and-see approach regarding downtown Oakland deals, according to the real estate firm.
“Sentiment remained cautious amid ongoing economic uncertainty,” Colliers stated.
San Francisco’s downtown office market failed to make any progress primarily because the large deals that did occur were primarily relocations within San Francisco or renewals of existing rental agreements, according to the report.
“Outside of the handful of large block transactions, the great majority of leases signed in San Francisco were for partial and single-floor spaces,” Colliers reported.
Despite the rough office market conditions in the Bay Area, Colliers did glimpse some hopeful signs for downtown San Jose.
“Downtown San Jose does excel in one aspect: population,” Colliers reported.
The population levels in San Jose overall as well as in the city’s downtown could help induce companies to lease space downtown or in markets near the downtown, such as Santana Row.
The Santana Row neighborhood has enjoyed a leasing boom for its new Santana West office building.
“Despite trailing in the office market, San Jose commands a whopping 44.4% of all multifamily residential units across the Santa Clara Valley,” Colliers reported. “Downtown San Jose comprises 8% of total market share alone.”
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