SAN JOSE — The South Bay office market has achieved its strongest three months of leasing activity in well over a year, a new report shows.
Tenants leased a combined 2.7 million square feet in the South Bay during the April-through-June second quarter of 2026, reported commercial real estate firm CBRE.
It was 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.
The tech industry was credited with fueling much of the upswing.
“Software and artificial intelligence companies accounted for 55.6% of total leasing volume at 1.5 million square feet,” CBRE stated in its report.
Lease renewals accounted for 63%, or 1.7 million square feet, of the total amount of office space rented in the second quarter.
“The market remains healthy with an increase in leasing activity primarily due to renewals,” CBRE reported.
As leasing activity improved, so did the area’s vacancy rates.
The South Bay rate was 15.2% in the second quarter, an improvement from the 15.4% vacancy level during the January-through-March first quarter of 2026, CBRE reported.
New office construction in the region remains scarce.
Two office projects are underway in Santa Clara, according to information provided in a separate report by commercial real estate firm Colliers.
Arista Networks is building a complex at 5200 Patrick Henry Dr. The company bought an office building at the site for $40 million in 2021, bulldozed the structure, and is now developing a headquarters totaling 245,000 square feet.
Nvidia is developing an expansion of its headquarters in Santa Clara with the development of a 324,000-square-foot office building at 2400 Condensa Way.