12/15/2025
As we rapidly approach the end of 2025, here are the latest trends shaping the San Jose retail commercial real estate market.
The latest data continues to reinforce what many of us are seeing on the ground: San Jose remains one of the West Coastβs most resilient retail markets, even as national uncertainty persists.
π Vacancy remains tight
Vacancy across San Jose proper continues to hold at impressively low levels β as little as 2.1% in northern submarkets and 3.8% downtown, with the metro ending 2025 projected at 4.8%. Even with store closures and modest move-ins ahead, new construction remains extremely limited, helping stabilize occupancy.
π Record-low construction activity
New deliveries are nearly nonexistent β on track for the smallest annual inventory growth of any major metro, under 0.1%. This is creating a hyper competitive environment for tenants focused on quality existing space.
π Shifting employment dynamics
Employment is expected to dip slightly (-0.7% YoY), but sectors like education, health services, and government are showing notable strength β a positive indicator for neighborhood-serving retail.
π Rents adjusting after years of gains
After a multi-year climb, rents are finally softening. The metroβs already-high average asking rent (above $36/SF) is expected to tick down in 2025 as vacancy edges up. Multi-tenant locations are seeing the sharpest adjustments.
π Investment activity heating up
Deal flow is picking up again, with transaction velocity up ~25% YoY, particularly in single-tenant assets and mixed-use settings. Interestingly, Downtown San Jose now accounts for ~15% of all single-tenant deals, fueled by strong fundamentals and a minimal development pipeline.
If you want a market report tailored specifically to your investment property, contact us today!
π J.J. Taughinbaugh β 650.391.1807
π Yuri Sergunin, CCIM β 650.391.1764