The vacancy rate for office and R&D space in San Mateo County has fallen to 8.4% in the first quarter, according to a new report from Cushman & Wakefield. This is a significant 190 basis point decrease from the 10.9% vacancy rate in the first quarter 2021. R&D space has driven the leasing activity, with that segment of the market operating at a 4.6% vacancy rate, down from 5.9% at the same time in 2021. The office market, on the other hand, which makes up 78% of the market, is operating at a 10.8% vacancy rate, down from 11% in early 2021.

In the first quarter, absorption totaled 501,000 square feet. For the fifth quarter in a row, leasing activity surpassed 1 million square feet with a total of 1.5 million square feet leased. Again, R&D activity has been behind the demand. In the first quarters, the biggest deals were signed by life science companies. The largest deals include Roblox taking 433,000 square feet at Bay Meadows Station 1 and 5 in San Mateo; Genentech leasing 155,685 square feet in South San Francisco; Nobell Foods leasing 66,234 square feet in South San Francisco; and Myraid Genetics taking 63,843 square feet in South San Francisco.

The leasing activity and decreasing vacancy rate has put upward pressure on rents. By the end of the first quarter, rents were at a record high of $6.43 per square foot on a monthly, full-service basis, up from $6.39 per square foot during the same period of 2021. Keeping in trend with the market theme, R&D space is driving the strong rent gains. R&D space is at $6.69 per square foot on a monthly, triple net basis, up from $6.30 per square foot in the previous quarter.