Economy: San Mateo On The Comeback
San Mateo County office-sector employment rose slightly year-over-year (YOY) to 416,800 jobs. Total nonfarm employment increased by 4,000 jobs (1.0%) while the unemployment rate fell 20 basis points (bps) to 3.7%. Venture capital funding declined from the first quarter but remained historically strong at $3.9 billion across 106 deals.
Supply: Balancing Act
San Mateo County’s industrial vacancy rate closed the second quarter at 4.7%, a 10-basis-point (bps) dip from year-ago figure of 4.8%. Since reaching a recent low of 2.3% in in the first quarter of 2023, vacancy has ticked higher. It does remain relatively tight compared to many other markets in the region and will remain that way as there are no large new developments in the pipeline. North County, the largest region by inventory, ended the quarter with a 5.2% vacancy rate, with most of the decrease in vacant space in South San Francisco due to strong leasing demand. Since North County’s recent high of 6.4% in the second quarter of 2024, vacancy has decreased by over 300,000 square feet (sf). San Mateo County recorded eight large blocks over 50,000 square feet (sf) with the newest additions at 405 Airport Boulevard South in South San Francisco, 125 Valley Drive in Brisbane and 610 Quarry Road in San Carlos.
Demand: North County Is The Hot Spot For Diverse Industries
The San Mateo industrial market ended the second quarter with overall net absorption of positive 10,961 sf, continuing the trend from the prior quarter’s positive 47,364 sf. North County remains attractive to a diverse set of industries, achieving five straight quarters of positive absorption at 270,741 sf. Most of the gains in occupancy for the quarter was in South San Francisco at 133,209 sf by ten tenants. Belmont/San Carlos was at the opposite end of the spectrum with 79,078 sf of net occupancy losses, led by a full building vacancy at 610 Quarry Road.
Pricing: Jump In Rents Across Most Markets
The average asking rate closed the second quarter at $1.74 per square foot (psf), on a monthly triple net basis, up $0.10 psf from the prior quarter and down $0.09 psf YOY. The average rate for manufacturing and light industrial product ended the second quarter at $2.09 psf, with warehouse product at $1.64 psf.
