SAN JOSE, Calif. (KRON) — Newly released numbers indicate Silicon Valley’s largest technology companies may have overcome pandemic-related setbacks as employees continue to return to the office.

Notably — Apple, Google, and Meta have implemented return-to-office programs, signaling a near-normal level of in-office operations. According to the latest analysis from Joint Venture Silicon Valley’s Institute for Regional Studies, leasing volume in the region continued a steady trend in the first Q1 of 2022.

Officials say these numbers are in-line with historical figures, despite increasing construction and fit-out costs.

“We’ve seen a dramatic rebound of local Flex/R&D space in the first quarter, with considerable declines in both vacancy and total availability,” said JLL’s Northern California Director of Research, Alexander Quinn. “The primary drivers have been from the demand from the advanced manufacturing/AI/mobility industries, as well as the ongoing trend of converting existing Flex/R&D into specialized lab space.”

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Here’s a breakdown of the findings (courtesy Joint Venture Silicon Valley):

• A total of 628,000 square feet of Silicon Valley commercial space was completed through Q1 2022.
• There were more than 260 commercial lease transactions in Silicon Valley in just the first quarter of Q1 2022, compared to an annual total of 882 in 2021 and 481 in 2020. 
• The average amount of square feet committed per lease continues to trend downward, reaching the lowest it has been since 2009.
• Vacancy rates overall have declined slightly, with only a minuscule amount of growth in vacancy rates for Office (up only 0.2 percentage points in Q1). In contrast, Industrial, Lab, and Flex/R&D vacancy rates have continued a downward trend through Q1 2022.
• Office space rental rates in Silicon Valley remained lower in Q1 than in New York City (by 17%) but higher than in Austin (by 25%), Seattle (by 31%), Portland (by 50%), and Denver (by 53%).
• Office rents have fluctuated since prior to the pandemic at locations near and not near to transit (within a 10-minute walk of a Caltrain, BART, or VTA station). Asking rents appear to have recovered, and were 64% higher near transit in Q1 2022 than not near transit.
• A total of 7.9 million square feet of new commercial office space was under construction throughout the Bay Area in Q1 2022. Of that total, 5.6 million square feet (71%) has been pre-leased, primarily (98.2%) to tech companies. 

Commercial space rental rates and construction completion

In total, regional commercial space rental rates increased slightly following two years in which officials said: “they had been artificially held steady.” As a result, there were high watermarks observed in Q1 for Industrial and Lab space. According to the analysis, leasing volume was similar to that of 2021 yet there was an increased number of total leases executed in Q1, indicating a smaller average amount of space per lease.

In addition, construction completions were limited while the construction pipeline for the region remains healthy and construction costs have rapidly increased since December 2020. The analysis shows that asking rates have continued to maintain an upward trajectory.

Rental rates for Lab and Industrial space reached new all-time highs in Q1 as landlords continued to explore opportunities to secure higher rents by converting Office or Flex R&D space which is in short supply.