San Jose's Industrial Sector Thrives Amid Office Market Struggles

Recent industrial leasing activity in San Jose highlights a robust demand for industrial space, particularly driven by the tech and logistics sectors. Notable leases include Nvidia's acquisition of 302,722 square feet in South San Jose and Transpak's expansion of 163,786 square feet in Newark, indicating a continued growth trajectory in Silicon Valley, especially in areas related to artificial intelligence and logistics ¹².

In stark contrast, the office market in San Jose is facing significant challenges. A recent default on an $88.1 million loan for a 250,000 square feet office campus in North San Jose, previously leased by eBay, has drawn attention to the financial distress affecting this sector. Reports indicate that property values have plummeted by 59% as vacancy rates rise, reflecting broader trends of uncertainty and distress in the office market ³.

Despite the challenges in the office sector, there is a sense of optimism fueled by the ongoing AI boom. However, developers are currently hesitant to initiate new projects due to uncertainties surrounding construction costs and interest rates. This cautious approach may impact future supply in the multifamily and retail sectors, which are currently more active compared to other commercial real estate segments ⁵.

Additionally, the light industrial sector continues to show signs of resilience. A recent refinancing arrangement of a $9.6 million loan for a light industrial property in Santa Clara suggests that investor interest in this asset class remains strong, despite broader economic uncertainties ⁴.

Overall, while the industrial sector in San Jose thrives, the office market grapples with significant challenges, highlighting the divergent trends within the commercial real estate landscape in the region.

Sources

1. The Registry (Bay Area) — Transpak Renews and Expands to 164,000 SQFT at 38503 Cherry Street in Newark
2. The Registry (Bay Area) — Nvidia Leases 303,000 SQFT Industrial Building at 5853 Rue Ferrari in South San Jose
3. The Registry (Bay Area) — Empty 250,000 SQFT eBay-Leased North San Jose Campus Defaults on $88.1MM Loan as Value Craters 59%
4. REBusinessOnline — Gantry Arranges $9.6M Loan for Refinancing of Santa Clara Industrial Property
5. The Registry (Bay Area) — AI Momentum Powers San Francisco and Silicon Valley in Summer 2026 Allen Matkins Survey, Yet Bay Area Developers Hold Back