San Jose, located in Silicon Valley, is the county seat of Santa Clara County. Known for its innovative tech culture and urban living, the region attracts entrepreneurs and tech enthusiasts globally. The metropolitan area, home to numerous high-tech companies, offers a robust economy, diverse job market, and high-quality education system. The region also provides various cultural, recreational, and entertainment opportunities, making it an attractive destination for businesses and residents.
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San Jose Regional Breakdown
San Jose, a key part of Santa Clara County, boasts a diverse, educated population with a high per capita income and impressive median household income. The area is home to over 1.9 million people, with nearly 1 million residing in San Jose. Educational attainment is high, with nearly 55% of residents holding a bachelor’s degree or higher. The median household income is $139,892, significantly above the national average.
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San Jose Job Market
San Jose’s economy thrives on technology, software production, and internet-related businesses. The region is home to major tech companies like Cisco, Western Digital, PayPal, Adobe, Apple, and Google. The area has over 6,600 tech companies and is ranked highly for STEM jobs and overall job prospects. Key educational institutions include Stanford University, UC Berkeley, and San Jose State University.
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San Jose Industrial Market
The industrial market in San Jose faces challenges due to high interest rates and recession fears, leading to reduced leasing activity and subdued tenant demand. Despite limited construction, vacancy rates are expected to rise if the economy leans towards a recession. The market reflects a shift towards replacing older industrial buildings with residential and office spaces.
Market Overview (Cushman & Wakefield Q2 2023)
- Inventory: 120,103,818 SF
- Vacancy Rate: 3.1% overall
- Absorption: 172,435 SF (YTD)
- Key Leases: Tesla 209,926 SF, RK Logistics 209,916 SF, OnTrack Logistics 132,900 SF, Bintang Badminton 123,969 SF
- Under Construction: 1,828,242 SF
- Largest Submarkets: South San Jose, Fremont, North San Jose, Santa Clara
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San Jose Office Market
San Jose’s office market has seen a dip in demand due to work-from-home policies and economic challenges. This trend has increased office availability and vacancy rates while creating a decline in net absorption. Businesses are downsizing or renewing existing leases temporarily, contributing to fiscal conservation and office space downsizing.
Market Overview (Kidder Mathews Q2 2023)
- Inventory: 128,906,198 SF
- Vacancy Rate: 14.3%
- Absorption: -1,954,034 SF (YTD)
- Key Leases: Santa Clara Valley Medical Center 231,579 SF, Arista 149,607 SF, Coinbase 40,000 SF, HCL Technologies 37,880 SF
- Under Construction: 2,997,093 SF
- Largest Submarkets: San Jose, Sunnyvale, Santa Clara
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San Jose Retail Market
San Jose’s retail market is influenced by strong economic growth in Silicon Valley, increased wages, and higher household incomes. However, the rise of non-store retailing and declining population have dampened traditional retail spending. While leasing activity is down, construction remains steady, revitalizing local malls into mixed-use urban villages.
Market Overview (NAI NorCal July 2023)
- Inventory: 80,238,077 SF
- Rent Growth: -0.4% (last 12 months)
- Vacancy Rate: 4.4%
- Absorption: 319,000 SF (12 month net)
- Key Leases: Hobby Lobby 77,165 SF, Dai Thanh Supermarket 31,610 SF, Burlington 30,300 SF, Nordstrom Rack 25,000 SF
- Under Construction: 180,967 SF
- Largest Submarkets: East San Jose-Willow Glen, South San Jose, West San Jose, Sunnyvale
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San Jose Multifamily Market
The multifamily market in San Jose is experiencing a slowdown in leasing activity due to high interest rates and economic uncertainty. Despite robust demand for housing, new deliveries have increased vacancy rates. Substantial construction activity continues, particularly in Downtown San Jose, Santa Clara, Sunnyvale, and Mountain View.
Market Overview (NAI NorCal July 2023)
- Total Housing Units: 714,244
- Multi-unit: 242,843
- Vacancy Rate: 5.0%
- Average Asking Rent: $2,970
- Rent Growth: -0.9% (last 12 months)
- New Construction: 7,900 units
- Largest Submarkets: Sunnyvale, Santa Clara, South San Jose, Downtown San Jose
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The Bottom Line
San Jose’s commercial real estate market offers diverse opportunities across industrial, office, retail, and multifamily sectors. Despite economic challenges, the region’s strong tech-driven economy, high quality of life, and robust infrastructure make it an attractive destination for investment.
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