San Jose's office market sits at the intersection of the world's most important technology corridor and a commercial real estate landscape undergoing significant transformation. With major employers like Adobe expanding its four-tower downtown headquarters campus and Cisco restructuring its north San Jose footprint, the office sector presents both opportunities and complexities for investors and developers seeking financing. Understanding the available loan products, current market conditions, and underwriting considerations is essential for anyone looking to acquire, develop, or refinance office properties in Silicon Valley's largest city.
Whether you are targeting a Class A tower downtown, a tech campus in North San Jose, or a value-add suburban office building, this guide covers the financing landscape for San Jose office properties in 2026.
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What Types of Office Loans Are Available in San Jose?
San Jose office property investors and developers have access to several financing structures, each suited to different investment strategies and property profiles.
Permanent Loans (Stabilized Properties): For office buildings with strong occupancy (typically 80% or higher) and stable cash flow, permanent loans offer the most favorable terms. These loans feature fixed rates for 5 to 10 years, amortization periods of 25 to 30 years, and LTV ratios up to 75%. Lenders evaluate the property's net operating income, tenant credit quality, and lease term remaining when underwriting these loans.
Bridge Loans (Transitional Properties): San Jose's elevated office vacancy creates opportunities for investors willing to acquire underperforming buildings and execute lease-up or repositioning strategies. Bridge loans provide short-term financing (typically 12 to 36 months) with interest-only payments and the flexibility to fund renovations, tenant improvements, and lease commissions during the stabilization period.
SBA Loans (Owner-Occupied Offices): Small business owners purchasing or refinancing their own office space can leverage SBA loan programs that offer lower down payments (as little as 10%) and longer terms. SBA 504 loans are particularly popular for owner-occupied office acquisitions in San Jose.
Construction Loans: For ground-up office development or major renovation projects, construction financing provides funds disbursed in draws as work progresses. Given San Jose's current vacancy levels, construction lending for speculative office projects has tightened, though build-to-suit and pre-leased projects still attract capital.
CMBS Loans: Commercial mortgage-backed securities provide non-recourse financing for larger office properties, typically $5 million and above. These loans offer competitive rates but come with rigid terms and limited flexibility during the loan term.
What Does San Jose's Office Market Look Like in 2026?
Understanding the current state of San Jose's office market is critical for investors seeking financing, because lender appetite and loan terms are directly influenced by market fundamentals.
Vacancy Rates: The Silicon Valley office market ended Q4 2025 with a vacancy rate of approximately 19.4%, though this represents improvement from highs above 22% seen in 2024. Downtown San Jose has experienced vacancy rates reaching 10-year highs, while the East San Jose submarket has performed notably better with vacancy as low as 2.65%. This wide variation by submarket creates both challenges and opportunities.
Sublease Contraction: Sublease availability has declined significantly, falling from 8.8 million square feet in late 2023 to approximately 6.6 million square feet by late 2024, with the sublease rate dropping to 4.3% in early 2025. This contraction signals that the worst of the post-pandemic office correction may be behind us.
Lease Rates: Asking rents averaged $5.41 per square foot per month in Q1 2025, relatively stable compared to prior quarters. However, inflation-adjusted asking rents fell 7% from 2024 levels, reaching their lowest point in a decade. Effective rents (after concessions) are even lower, with landlords offering generous tenant improvement allowances and free rent periods to attract tenants.
Flight to Quality: Demand is increasingly concentrated in modern, amenity-rich buildings. AI companies, enterprise software firms, and biotech tenants are driving the strongest leasing activity, with companies like Databricks signing a 305,000 square foot expansion in nearby Sunnyvale. Older Class B and C buildings face the steepest challenges.
How Are Lenders Underwriting San Jose Office Loans in the Current Market?
The office sector has faced more scrutiny from lenders than any other commercial property type since 2022. Here is how underwriting standards have adjusted for San Jose office properties.
Lower LTV Ratios: Where lenders once offered 75% LTV for stabilized office properties, many have reduced maximum leverage to 60% to 65% for all but the strongest assets. Class A buildings with long-term tech tenants may still qualify for higher leverage, but suburban and Class B/C properties face tighter constraints.
Higher Debt Service Coverage Requirements: Lenders are requiring DSCR ratios of 1.30 to 1.50 for office properties, compared to the 1.20 to 1.25 range that was common before the pandemic. This reflects the increased uncertainty around office occupancy and rental rate stability.
Tenant Concentration Risk: If a single tenant occupies more than 30% to 40% of an office building, lenders evaluate that tenant's credit quality, remaining lease term, and likelihood of renewal. In San Jose, where tech companies sometimes lease entire buildings, this analysis is particularly important given the industry's periodic layoff cycles.
Capital Reserves: Lenders increasingly require borrowers to escrow funds for tenant improvements and leasing commissions, recognizing that releasing vacant space in the current market requires significant capital. Reserve requirements of $10 to $20 per square foot for anticipated re-tenanting costs are common.
Recourse Requirements: Non-recourse lending for office properties has become more selective. Many lenders now require partial or full recourse for office loans, particularly for properties with elevated vacancy or near-term lease expirations.
Use our commercial mortgage calculator to model different financing scenarios for your San Jose office investment.
Which San Jose Office Submarkets Present the Best Financing Opportunities?
San Jose's office market is not monolithic. Different submarkets offer distinct risk and return profiles that directly impact financing availability and terms.
Downtown San Jose: The urban core is anchored by Adobe's expanded four-tower headquarters campus, which now encompasses approximately 1.25 million square feet including the 18-story Founders Tower. Downtown benefits from transit access (Caltrain, VTA Light Rail, future BART extension) and the ongoing revitalization of the area around San Jose State University. However, downtown vacancy rates have reached 10-year highs, making lenders cautious about speculative acquisitions. Bridge loans for value-add repositioning of older downtown towers present compelling opportunities for experienced operators.
North San Jose: This submarket is home to Cisco's headquarters campus, though the company recently sold four office buildings and relocated some operations to Santana Row. North San Jose offers large-floorplate buildings suited to tech campuses, and proximity to the Milpitas BART station adds transit connectivity. Vacancy is elevated but improving, and lenders view this submarket favorably for well-located properties with modern improvements.
Santana Row/Valley Fair Corridor: The mixed-use Santana Row development has attracted tenants including Cisco's relocated units, creating a live-work-play environment that appeals to the flight-to-quality dynamic driving current office demand. Properties in this corridor command premium rents and attract more favorable financing terms.
West San Jose/Stevens Creek: A mature office corridor with a mix of single-story and mid-rise buildings. More affordable entry points compared to downtown or North San Jose make this area attractive for smaller investors. SBA loans are particularly well-suited for owner-occupants in this submarket.
East San Jose: With the lowest vacancy rate in the metro area at 2.65%, East San Jose is the tightest submarket. While the office inventory is smaller and consists primarily of smaller buildings, the low vacancy supports strong underwriting metrics and more favorable loan terms.
What Role Does the Tech Industry Play in San Jose Office Loan Performance?
The technology sector's influence on San Jose's office market cannot be overstated, and lenders evaluate tech-related risks and opportunities carefully when underwriting office loans.
AI-Driven Demand: The artificial intelligence boom is reshaping Silicon Valley's office landscape. Companies developing AI hardware, software, and applications are among the most active tenants, and their space needs are growing. Nvidia, headquartered in nearby Santa Clara, has fueled demand throughout the region. AI tenants tend to prefer modern buildings with robust power infrastructure and fiber connectivity.
Return-to-Office Momentum: Major tech employers have increasingly mandated in-office work three to five days per week, reversing the remote work trend that contributed to rising vacancies. This shift is gradually reducing available space and supporting occupancy improvements, though the full impact on vacancy statistics has been slow to materialize.
Tech Employment Dynamics: Tech employment represents 17.2% of total employment in San Jose. While the sector experienced significant layoffs in 2022 and 2023, hiring has rebounded in AI, semiconductors, and enterprise software. However, many companies are leasing less space per employee than pre-pandemic, which partially offsets the employment recovery.
Corporate Real Estate Restructuring: Companies like Cisco are rightsizing their real estate footprints, selling older campus-style buildings while consolidating into premium mixed-use locations. This creates acquisition opportunities for investors who can reposition these properties for new uses or tenants.
For transitional office properties that need time to stabilize, bridge loan programs offer the flexibility to execute lease-up strategies before refinancing into permanent financing.
How Can Investors Finance Value-Add Office Acquisitions in San Jose?
San Jose's elevated vacancy rates create opportunities for investors who can acquire office buildings below replacement cost and execute repositioning strategies. Here is how to structure the financing.
Acquisition via Bridge Loan: A bridge loan allows you to acquire a partially vacant or underperforming office building with interest-only payments during the stabilization period. Typical bridge loan terms for San Jose office properties include 65% to 70% LTV based on as-is value, 12 to 36 month terms with extension options, and interest rates of 7% to 9%.
Renovation and Repositioning: Bridge loans can include reserves or additional draws for tenant improvements, lobby renovations, amenity additions (fitness centers, conference facilities, outdoor workspaces), and building system upgrades. Modern amenities are essential for attracting the quality tenants that lenders want to see in the rent roll.
Lease-Up Period: During the stabilization phase, the bridge loan's interest-only structure keeps debt service manageable while you build occupancy. Target 80% to 85% occupancy with creditworthy tenants before refinancing.
Permanent Refinance: Once the property is stabilized with a strong rent roll, refinance into a permanent loan with a fixed rate, longer term, and lower debt service payments. The improved NOI and occupancy should support a higher loan amount, potentially returning some of your initial equity.
Exit Strategy: Alternatively, you may choose to sell the stabilized asset at a significantly higher price per square foot than your acquisition basis, capitalizing on the value you created through repositioning.
What Are Office Loan Interest Rates in San Jose for 2026?
Office loan rates in San Jose vary significantly based on property quality, occupancy, loan structure, and borrower strength. Here is a general framework for current pricing.
Stabilized Class A (75%+ Occupied): Permanent loan rates range from 5.75% to 6.75% for the strongest assets with creditworthy tenants and long remaining lease terms. These properties attract the most competitive financing.
Stabilized Class B (70%+ Occupied): Rates of 6.25% to 7.50% are typical, reflecting higher perceived risk from tenant credit quality and potential capital expenditure needs.
Bridge/Transitional: Bridge loan rates for office properties currently range from 7.00% to 9.50%, depending on the stabilization risk, sponsor experience, and LTV. Higher leverage transactions push toward the upper end of this range.
SBA 504 (Owner-Occupied): SBA 504 loans for owner-occupied office purchases offer rates in the low to mid 6% range, with the advantage of only 10% down payment and 25-year terms.
Construction: Ground-up office construction loans, where available, carry rates of 8% to 10% with substantial pre-leasing requirements (typically 40% to 60% of the building).
Explore San Jose commercial loan options for a comprehensive view of available financing.
What Are the Key Risks of Financing San Jose Office Properties?
Investors and lenders should evaluate several risk factors specific to San Jose's office market.
Structural Demand Shifts: Remote and hybrid work have permanently reduced office space needs per employee. Even as companies mandate return-to-office, most are utilizing 15% to 25% less space per worker than pre-pandemic levels. This structural shift means vacancy may take years to return to pre-2020 levels.
Obsolescence Risk: Older office buildings without modern amenities, efficient floor plates, and strong infrastructure face the highest vacancy and re-tenanting challenges. Retrofitting these properties can cost $50 to $150 per square foot, and the return on that investment depends on the building's location and competitive positioning.
Concentrated Industry Exposure: San Jose's heavy reliance on the tech sector means that industry downturns (such as the 2022-2023 layoff wave) can produce sharp increases in available space. Portfolio diversification across property types and geographies can mitigate this risk.
Interest Rate Sensitivity: Office properties with lower cap rates (4% to 5% for Class A) are particularly sensitive to interest rate movements. A rate increase that pushes debt costs above the cap rate creates negative leverage, reducing investor returns.
Lease Rollover Risk: Office leases typically run 5 to 10 years. Properties with significant lease expirations in the near term face uncertainty about renewal rates and the cost of re-tenanting. Lenders discount properties with high rollover risk through lower LTV ratios and higher rate spreads.
How Does the Google Downtown West Project Affect the San Jose Office Market?
Google's massive Downtown West development, approved for up to 7.3 million square feet of office space along with housing, retail, and public amenities near Diridon Station, is a transformative project that will reshape San Jose's office landscape over the coming decade.
Scale of Impact: When completed, Downtown West could nearly double the office inventory in downtown San Jose. The project spans 80 acres and represents one of the largest mixed-use developments in California history.
Phased Delivery: Construction is proceeding in phases, with the full buildout expected to take 10 to 15 years. This phased approach means the market will absorb new supply gradually rather than all at once, reducing the risk of a sudden vacancy spike.
Infrastructure Investment: The project includes significant public infrastructure improvements, including new parks, affordable housing, transit connections, and community facilities. These improvements will benefit surrounding properties and could catalyze additional investment in the Diridon Station area.
Financing Implications: For nearby office property owners, Google's presence creates a double-edged dynamic. On one hand, the project brings thousands of new workers and validates downtown San Jose as a premier tech employment center. On the other hand, the new supply could create competitive pressure on existing buildings, particularly older assets that lack the amenities Google's campus will offer.
Investors considering office acquisitions near the Downtown West footprint should factor in both the long-term upside from the Google ecosystem and the near-term competitive risks from phased supply additions.
Frequently Asked Questions
What is the minimum down payment for a San Jose office loan?
For conventional commercial office loans, expect a minimum down payment of 25% to 35%, depending on the property's occupancy, tenant quality, and overall risk profile. SBA 504 loans for owner-occupied offices can reduce the down payment to as little as 10%. Bridge loans for transitional properties typically require 30% to 40% equity.
Can I get a non-recourse office loan in San Jose?
Non-recourse financing is available for stabilized, well-occupied office buildings, typically through CMBS lenders or life insurance companies. However, given the elevated risk perception for office properties post-pandemic, many lenders have shifted to partial or full recourse for all but the strongest assets. Properties with 80%+ occupancy, long-term leases to creditworthy tenants, and strong locations have the best chance of securing non-recourse terms.
How long does it take to close an office loan in San Jose?
Permanent loans for stabilized office properties typically close in 45 to 90 days. Bridge loans can close faster, often in 21 to 45 days, which can be a competitive advantage when bidding on acquisitions. SBA loans generally take 60 to 90 days due to government agency processing requirements. Construction loans may take 90 to 120 days given the complexity of the underwriting and documentation.
Are lenders still financing office buildings in San Jose given the vacancy rates?
Yes, but lenders are more selective than in previous market cycles. Well-occupied Class A buildings with strong tenant rosters still attract competitive financing. Value-add properties with viable repositioning plans can secure bridge financing from debt funds and specialty lenders. The properties that struggle to find financing are older buildings with high vacancy, significant deferred maintenance, and no clear path to stabilization.
What cap rates are lenders using to value San Jose office properties?
Cap rates for San Jose office properties have expanded significantly since 2022. Class A properties are valued at 8.4% cap rates, Class B at 8.68%, and Class C at 9.02% or higher. These represent substantial increases from the 5% to 6% range common before the pandemic, reflecting both higher interest rates and increased office market uncertainty.
Should I consider converting a San Jose office building to another use?
Office-to-residential and office-to-lab conversions are being explored throughout Silicon Valley, though not every building is a suitable candidate. Conversion feasibility depends on floor plate dimensions, structural capacity, zoning, and cost relative to ground-up construction. San Jose has shown receptiveness to adaptive reuse projects, and conversion financing is available through specialized lenders. Contact our team to discuss conversion financing options.
Ready to Finance a San Jose Office Property?
San Jose's office market is navigating a period of transition, with elevated vacancy creating acquisition opportunities for investors with the capital and expertise to reposition properties for the next cycle. Whether you are acquiring a stabilized Class A tower, executing a value-add strategy on a suburban office park, or purchasing an owner-occupied office through an SBA program, the right financing structure is critical to your success.
Explore permanent loan programs, review bridge financing options, or contact our team to discuss your San Jose office property financing needs.