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Amid compressing vacancy rate, Silicon Valley industrial development ramps up after period of stagnation

  • ​The Valley has long faced a problem with lack of industrial inventory. Since 2000, Silicon Valley has lost approximately 6.8 MSF of industrial product, contributing to a compressing vacancy rate of 4.5 percent.
  • Up until 2016, industrial demolitions far outweighed deliveries. Redevelopment into new office or residential space was a main driver, an effective strategy to maximize returns in a region with high land costs.
  • However, the landscape is shifting, largely due to the rise in e-commerce and last mile delivery. Major retailers are chasing industrial space in constrained markets such as Silicon Valley to better reach their customer base.
  • E-commerce and advanced manufacturing tenant demand has spurred a resurgence in speculative industrial development with 475,000 square feet currently under construction. Approximately 8 MSF of proposed development is also in the pipeline. Leasing activity in newly delivered projects over the next few quarters will act as a bellwether for future developments.

Source: JLL Research​

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