Office vacancy levels improved in the San Jose area but worsened in both Oakland and San Francisco in the second quarter of 2025, new real estate reports show.

The upswing in the South Bay office market arrives on the heels of big office leases in the region that have gobbled up some of the empty office space.

The vacancy rate for office buildings in the South Bay was 15.9% during the April-through-June second quarter of 2025, according to a new report released by Colliers, a commercial real estate firm.

“We are seeing a significant increase in larger users in the marketplace,” said David Sandlin, an executive vice president with Colliers. “The tenants that actually completed transactions in the second quarter were really able to cherry-pick the best office buildings at relatively inexpensive rents.”

The 15.9% South Bay office vacancy level was an improvement from the 16.4% level in the January-through-March first quarter of 2025, Colliers reported.

“Large lease and sale transactions in the second quarter of 2025 underscored a rebounding office market” in Silicon Valley, Colliers stated in its new report.

But the downtown Oakland office market posted a vacancy rate of 29.1% in the second quarter, a jump from the 28.2% rate for that region in the first quarter, Colliers reported in a separate survey.

“Meek tenant activity,” along with “muted demand and limited leasing activity,” produced the worsening state of the downtown Oakland office market, Colliers stated. “Tenants continued to reassess and adjust their space needs.”

San Francisco office market conditions deteriorated further in the second quarter, as well, according to the real estate firm. Nearly one-third of San Francisco’s office spaces were empty in the April-through-June period.

The 31.2% office vacancy level in the second quarter was worse than the 30.6% vacancy rate for the January-through-March first quarter, according to the San Francisco market survey.

Office vacancies are generally worse now than they were prior to the coronavirus outbreak, when state and local government agencies imposed wide-ranging business shutdowns that kept workers away from their offices.

Even as the Bay Area has rebounded from the pandemic, the return to the workplace has been uneven. Many big employers, such as tech companies, have curtailed their appetites for office space.

Despite the struggles of the tech industry — which over the first five months of 2025 slashed about 14,000 jobs in the Bay Area, according to a Beacon Economics estimate — experts believe the tech sector is crucial to improvement in the South Bay office market.

“The strength of the tech industry is a huge factor,” said David Taxin, partner with Meacham Oppenheimer, a commercial real estate firm.

The South Bay also has some advantages over San Francisco and Oakland, in Taxin’s view.

“People want to live in the South Bay,” Taxin said. “The South Bay has a great urban and suburban environment compared with San Francisco and Oakland.”

The South Bay office market also showed improvement in a crucial metric called net absorption, which compares the difference between the amount of office space that is filled to the amount that becomes empty.

In the second quarter, the South Bay experienced 313,400 square feet of net absorption, which means that much more space became occupied through leases than became empty through tenant exits.

The net-positive absorption is seen by Colliers as additional evidence of a brightening outlook for the office market in the South Bay, with improvement stretching across a lengthening period.

“Absorption was positive for the third consecutive quarter, illustrating measured growth in the (Silicon Valley) region following six quarters of net occupancy losses,” Colliers stated.

The positive trends for the South Bay office market could extend through the end of this year, in Sandlin’s view.

“The activity in the second quarter kind of jump-started business in the South Bay,” Sandlin said. “We expect that even more transactions will be happening in the third quarter.”