Office tenants on the Peninsula are increasingly choosing newer, high-end buildings located in walkable areas near Caltrain stations. According to data from Colliers cited by the San Francisco Business Times, as much as 90 percent of leasing activity in the fourth quarter took place in premium office spaces close to transit and amenities.
Older office properties have seen less interest from tenants. The pace of new office construction in the region has slowed, raising concerns that there may soon be a shortage of top-tier office space available for companies seeking modern workplaces.
Several companies have recently made moves to expand their presence in transit-oriented locations. Roblox expanded its offices at Bay Meadows in San Mateo by 112,000 square feet. The site is surrounded by housing, retail, and is adjacent to Caltrain service.
In Burlingame, Upstart Holdings leased 54,000 square feet at the newly developed 220 Park office building near the city’s Caltrain station. CBRE’s coworking brand Industrious also signed a lease at 220 Park for nearly 20,000 square feet last quarter.
Law firm Paul Hastings plans to move into a 45,000-square-foot space in Redwood City as part of its focus on offices near transit hubs nationwide. Databricks continued expanding its Bay Area footprint with three floors at Cityline’s 250 West Washington Avenue in Sunnyvale, bringing its total occupancy at that development—located near Sunnyvale’s Caltrain station—to 455,000 square feet.
State policy changes may further support this trend. Last year, California Governor Gavin Newsom signed Senate Bill 79 to allow taller residential buildings within a half-mile of bus and train stops. The law aims to encourage more development projects close to transportation connections.
The quarter saw landlords fill over 17,600 square feet of space—the second straight quarter with positive net leasing. However, overall vacancy on the Peninsula increased to 19.2 percent during the fourth quarter while asking rents dropped by five percent compared to the previous quarter. The higher vacancy rate was partly due to Oracle vacating nearly 300,000 square feet at its longtime Redwood City campus.
“Landlords overall filled 17,674 square feet in the quarter, marking the second consecutive quarter of positive absorption when more space was leased than vacated,” according to the Business Times.
— Chris Malone Méndez
