The San Francisco Peninsula, including San Mateo County, is seeing an increase in industrial demand – yet short-term headwinds may threaten this upward trend.
Net absorption made a significant turnaround over the past year, swinging from negative 709,900 square feet to positive 53,300 square feet in the first quarter, according to a Colliers report. Just three months earlier, net absorption stood at minus 19,200 square feet.
The CRE firm said that most of the activity came from new deals rather than renewals.
"The largest occupancy gains were seen in Brisbane, where 207,584 square feet was taken by Hensley Party Rentals and Mytra Robotics, in 435 and 427 Valley Drive, respectively, as well as a 70,728 square foot lease by Short Story at 100 Grand Avenue, South San Francisco," Colliers wrote.
Vacancy fell by a full percentage point year-over-year to 3.1 percent. Quarter-over-quarter, the rate slipped by 30 basis points.
While asking leasing rates grew by four cents to $1.92 per square foot NNN on average, they were flat from the year-ago levels.
The one negative in the quarter was that leasing plunged by 19 percent from the previous three months to 362,888 square feet.
While many key fundamentals showed improvement in the first quarter, Colliers warns of a couple of headwinds to watch for that could cause some disruptions. This includes the "intertwined nature" of the industrial sector, which could lead to a slowdown in the market, as well as limited construction.
"Though the market’s performance early in 2025 has been a source of optimism, the lack of new construction due to the high cost of land, as well as a continued scarcity of available inventory, may create long-term challenges for tenants seeking space," Colliers wrote.
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