Q1 2025 San Francisco Peninsula Industrial Market Summary

The San Francisco Peninsula industrial market experienced continued shifts in Q1 2025 as both availability and vacancy reached 10-year highs, yet still remained lower than many other Northern California regions. Total vacancy rose to 5.4% and total availability hit 7.5%, driven by a combination of tenant movement, softening demand, and sublease activity.

Despite the challenges, the market recorded 10,494 square feet of net absorption, marking the second consecutive quarter of occupancy gains. The largest contributing lease was from robotics company Mytra, which signed a 101,350 SF lease in Brisbane, representing over one-third of all tech leasing volume for the quarter. Smaller leases (10,000 SF or less) comprised over 63% of transactions in Q1, with deal velocity improving compared to late 2024. The average lease size jumped to 15,000 SF, up 78.7% quarter-…

Class A warehouse vacancies in Burlingame contributed to the most negative net absorption. Aeronet Worldwide’s 83,674 SF listing at 1755 Rollins Rd. for sublease was the single largest contributor to loss in that submarket. In total, Burlingame reported -102,939 SF of net absorption—the weakest of all tracked areas.

Asking rents for industrial space averaged $1.89/SF NNN across the Peninsula, up 3.5% YoY. Manufacturing spaces averaged $2.03/SF, and warehouse rents averaged $1.87/SF. With no new supply delivered and no projects under construction, demand continues to outpace speculative development.

On the capital markets side, two notable sales were recorded in Q1. Longpoint Realty Partners acquired a 22,275 SF Class B property in South San Francisco for $8.0 million, or $360/SF. A private individual purchased a 12,900 SF property in Redwood City for $4.8 million, at $372/SF. Investment activity remains cautious amid political uncertainty and elevated interest rates, although the market entered 2025 with stron…

Key Market Indicators:
• Total inventory: 35.5M SF 
• Q1 net absorption: 10,494 SF 
• Average asking rent: $1.89/SF NNN 
• Vacancy rate: 5.4% | Availability: 7.5% 
• Top sublease contributors: Burlingame, South San Francisco 
• Highest activity sectors: Technology, Logistics, Food & Beverage

Outlook:
The San Francisco Peninsula industrial market is expected to stabilize further in the second half of 2025, driven by rising lease activity, expanding tech sector demand, and a continued shortage of new supply. While availability is elevated, tenant interest remains healthy—particularly for Class B product and functional last-mile distribution space.