‘Flight to quality’ holding
Podcasts and YouTube panels are stressing a renewed 'flight to quality'—AI and robotics tenants are favoring buildings with power, cooling and custom MEP over trophy downtown addresses, shifting demand into flex/R&D corridors. (x.com)
Flex/R&D vacancy in the Bay Area has climbed past roughly 23% while logistics/warehouse vacancy sits near 7–9%, and average industrial asking rents are reported between $16–$28/SF — a bifurcation that is redirecting demand into suburban flex and R&D submarkets. (warecre.com) Major AI and advanced‑tech occupiers have anchored South Bay flex/R&D and mixed‑use campuses: Databricks took a 305,400‑SF building at Cityline Sunnyvale in July 2025, and Walmart’s e‑commerce arm signed a 338,307‑SF lease at Jay Paul’s Tech Corners in Sunnyvale in June 2025. (connectcre.com) (nmrk.com) Market compilations cited by Colliers and reported in industry press show AI‑sector leasing and renewals in the Bay Area surged from 2020 baselines, with some outlets describing a roughly 700% increase in AI startup leasing activity. (connectcre.com) GPU‑intensive AI and robotics R&D are raising site power‑density requirements well above traditional office norms, accelerating adoption of liquid‑cooling and other high‑density solutions once rack loads exceed air‑cooling practical limits. (coresite.com) (datacenters.com) Developers are responding with lab‑ready shells and bespoke MEP work: CBRE documents higher fit‑out costs and a return to build‑to‑suit activity for lab/R&D, while MEP vendors report wider use of AI‑assisted design, prefabrication and modular MEP assemblies to shorten delivery timelines. (cbre.com) (slate.ai) Office‑to‑lab and R&D conversions have jumped (industry tracking puts conversion activity up ~49% in recent years), and listings from Menlo Park to South San Francisco show spec R&D/flex buildings being marketed with upgraded power, HVAC and lab utilities to attract hardware, AI and robotics tenants. (bisnow.com) (cityfeet.com)
