Economy: San Mateo Embracing Tech and AI Demand
San Mateo County office-sector employment rose slightly year-over-year (YOY) to 418,500 jobs. Total nonfarm employment increased by 5,900 jobs (1.4%) while the unemployment rate fell 40 basis points (bps) to 3.6%. Venture capital funding declined from the second quarter but was still a healthy $3.4 billion (B) across 101 deals. Deals for the year totaled $11.8B, already surpassing 2025 at $10.4B and only trails the 2021 record high of $20B.
Supply: Tailwinds Build as Supply Shrinks
San Mateo County’s industrial vacancy rate closed the third quarter at 4.5%, a 10-basis-point (bps) dip from the year-ago figure of 4.6%. Since reaching a recent low of 2.3% in the first quarter of 2023, vacancy has ticked higher. It is relatively tight compared to many other markets in Northern California 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 at 4.9%. Since North County’s recent high of 6.4% in the second quarter of 2024, vacancy has decreased by over 420,000 square feet (sf). There were eight large blocks over 50,000 square feet (sf) available in San Mateo County at the close of the quarter with the newest addition being 245 South Spruce Avenue in South San Francisco.
Demand: North County Hot Streak Continues
The San Mateo industrial market ended the third quarter with overall net absorption of positive 96,653 sf, building on the trend from the prior quarter’s positive 14,496 sf. North County remains attractive to a diverse set of industries, achieving six straight quarters of positive absorption totaling 358,939 sf. Most of the gains in occupancy were in South San Francisco at 309,105 sf over the same period. Leasing activity for the quarter hit nearly 500,000 sf of split between 64% new leases and 36% renewals. Almost half of all leasing was in Brisbane, led by PITCO Foods 89,200 sf renewal at 385 Valley Drive.
Pricing: Advanced Technology Demand Drives Rent Growth
The average asking rate jumped in the third quarter at $2.14 per square foot (psf), on a monthly triple net basis, up $0.40 psf from the prior quarter and up $0.34 psf YOY. The biggest swings are in South San Francisco and Burlingame as more advanced technology uses are offered in big block spaces. The average rate for manufacturing and light industrial product ended the third quarter at $2.09 psf, with warehouse product at $2.15 psf.
