Silicon Valley real estate development has reached its lowest point since 2013, according to a new quarterly report from Joint Venture Silicon Valley and JLL. The report highlights both growth in completed projects and a significant decline in new developments.
The findings matter because commercial real estate is often seen as an indicator of the region’s overall economic health. The report shows that while developers completed 5.6 million square feet of new office and industrial space in the first nine months of 2025—the fastest growth rate since 2021—commercial footage under development dropped to 4.5 million square feet, down 45% from the end of 2024 and down 79% from its most recent peak in 2021.
Commercial leasing for the first three quarters of the year reached 20.4 million square feet, putting it on track for the highest annual volume since 2018. Vacancy rates improved slightly to 22% from 23% in the previous quarter but remain more than double the pre-pandemic rate of 2019 and exceed levels seen during the dot-com bust in the early 2000s. According to land use consultant Bob Staedler, “Silicon Valley has a split personality right now (…) This report just confirms what we’re seeing on the ground.” Staedler said commercial real estate is not in crisis and property values are stable, but high vacancy rates are causing a slowdown in new construction.
Russell Hancock, Joint Venture’s president and CEO, said Silicon Valley is experiencing uncertainty due to inflation and unclear government policies. “In uncertainty, no one wants to invest (…) Nobody wants to make any big bets right now,” Hancock said.
Staedler and Hancock expect recovery over time, driven by emerging industries such as artificial intelligence and a gradual return to office work. Some older office buildings may be converted into multifamily housing.
There are some positive signs for building owners and developers. Alexander Quinn, senior director of Northern California research at JLL, said, “We still have a lot of inventory to sort through, but we’ve seen the turnaround actually start as early as the first quarter of 2024.” While office buildings made up just 22% of new commercial construction last year—down from an average of 55% over four years—lab and industrial space now account for more than two-thirds of all new development due to growth in life sciences and advanced manufacturing. Quinn pointed out that robotics and drone makers are contributing to this demand because Silicon Valley brings together hardware, software, and AI engineering talent needed for these technologies.
