SAN JOSE — The South Bay office market has achieved its strongest three months of leasing activity in well over a year, hitting a benchmark that suggests tenants are filling up spaces in the region at a brisk clip, a new report disclosed.
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Tenants leased a combined 2.7 million square feet in the South Bay during the April-through-June second quarter of 2026, reported CBRE, a commercial real estate firm.
That figure represented the most square footage leased in the region since the October-through-December fourth quarter of 2024, when tenants completed leasing deals that totaled 3.1 million square feet, CBRE reported.
Leasing activity in the South Bay drove an improvement in the area’s vacancy rates.
The South Bay’s office vacancy rate was 15.2% in the second quarter, which was an improvement from the 15.4% vacancy level during the January-through-March first quarter of 2026, CBRE reported.
New office construction activity in the region is scarce. Two office projects are underway, both in Santa Clara, according to information provided in a separate report by Colliers, a commercial real estate firm.
Arista Networks is building a headquarters complex at 5200 Patrick Henry Drive, a project that was launched after Arista bought an office building at that site for $40 million in 2021. Arista bulldozed the structure and is developing a headquarters totaling 245,000 square feet.
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Nvidia is developing an expansion of its vast headquarters hub in Santa Clara by developing an office building at 2400 Condensa Way that totals 324,000 square feet.
Decisions by tenants to renew office leases rather than sublease space or scout for new sites have buoyed the South Bay office sector.
“The market remains healthy with an increase in leasing activity primarily due to renewals,” CBRE reported.
Lease renewals accounted for 63%, or 1.7 million square feet of the total amount of office space that was rented in the second quarter.
The tech industry fueled the leasing activity during the second quarter.
“Software and artificial intelligence companies accounted for 55.6% of total leasing volume at 1.5 million square feet,” CBRE stated in its report.
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