As hybrid work habits stabilize and the life science sector continues to gain strength, demand for office and R&D space in the Bay Area has increased, according to a new report by brokerage CBRE. The number of tenants in the region looking for space increased 14 percent in May, with Oakland seeing the biggest uptick.
Prospective tenants increased from 299 in the first quarter to 341 in May. Oakland experienced the largest increase at 44 percent, and the Peninsula came in second with 26 percent. San Francisco and Silicon Valley saw similar uptick in interest at 14 percent, while the I-680 corridor, which runs from Walnut Creek to Fremont, posted a 20 percent decrease. Technology was the leading industry sector looking for space, making up 30 percent of the prospective tenants, followed by life sciences (19 percent) and professional/business services (18 percent).
According to CBRE research, office tenants pulled back in the first quarter in response to macroeconomic headwinds that included rising inflation, cost-cutting by companies, layoffs and higher interest rates. Demand, “although marginal,” started to pick up at the beginning of the second quarter as more startups and AI companies look to establish or grow their offices and hybrid work policies have generally stabilized.
The decline of interest along the I-680 corridor stands in contrast to its hot start early in the year. In the first quarter, tenants were looking for 2 million square feet of office space in the corridor, with 20 percent, or one fifth of active tenants coming from outside markets to the I-680 corridor, the report found.
“These tenants are also operating in a cost-conscious environment and office rents in Walnut Creek, for example, are lower than San Francisco,” Andy Schmitt from CBRE, said about the increase last quarter.
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