President and COO
As someone who’s been building across Northern California for decades, I’ve seen this industry change a lot. And in 2025, we’re in another one of those pivotal moments. Industrial construction is still red hot. Retail is clawing its way back. Office space? Well, let’s just say it’s trying to figure out what it wants to be when it grows up.
Here’s what I’m seeing across the field right now and what I think matters most for owners, developers, brokers, and anyone else trying to make smart decisions in this market.
2024 was a tough year. Commercial construction spending in California dropped close to 15 percent, mostly thanks to high interest rates and uncertainty on borrowing. A lot of folks hit pause on private development, waiting to see if rates would come down.
That said, public work kept us afloat. Schools, healthcare, transportation, and infrastructure have stayed busy. And I’ll say this: when private work slows, a lot of GCs are grateful for well run public projects that keep crews working.
We’re still up against a serious labor shortage. Almost everyone in the trades is already booked, and finding people with the right skillset takes work. So builders are leaning hard into prefab, modular, and AI assisted scheduling just to get it all done.
And while supply chains are slowly improving, material costs haven’t returned to earth yet. Most of us are planning further ahead and locking in prices where we can.
California isn’t easing up on its green goals. Thanks to Title 24 updates, almost every commercial project now needs solar and storage built in. That means more planning up front, more coordination with consultants, and a little more pressure on the budget.
Cities like Fremont and San Jose are layering on even more sustainability requirements like EV infrastructure, all electric MEP, smart lighting, and LEED targets.
Now here’s the good news: after years of developers saying it’s too hard to build here, state lawmakers are finally trying to cut the red tape. There’s momentum behind bills aimed at streamlining the permitting process, and some cities are starting to fast track the right kinds of projects, especially mixed use or adaptive reuse plans.
Is it perfect? No. But there’s a noticeable shift, and we’re seeing that translate into real approvals getting issued a little faster
Office construction in NorCal is still in a holding pattern. In San Francisco, vacancy rates hit over 37 percent, and Silicon Valley isn’t far behind. Big employers cut space, hybrid work stuck around, and most speculative new office builds are on hold.
What’s happening instead? Adaptive reuse. We’re seeing offices turn into housing, labs, or co working hubs. And tenants that are leasing want smaller footprints with better design, places people actually want to be in. This means upgraded HVAC, hot desks, collaborative spaces, and touchless everything.
It’s not about square footage anymore. It’s about experience
If you’re working in warehousing, logistics, manufacturing, or data centers, you’re staying busy. Industrial construction is still one of the strongest sectors in NorCal.
Yes, vacancy rates ticked up slightly to around 6.8 percent, but that’s only because we’ve had so much new space come online. The demand is still real, especially around I 5 and I 880. Cold storage, EV supply chain, last mile delivery, and AI powered data centers are all driving growth.
Tilt up panels, fast prefab systems, and solar ready design are now the norm. And tenants are looking for next generation warehouses, modern, high clear, sustainable. Older industrial buildings that haven’t kept up are going to feel the pressure
Retail’s not dead. It’s just evolving. In 2025, we’re seeing smaller, open air shopping centers, often anchored by grocery, healthcare, or fitness.
In fact, Bay Area retail vacancy rates held under 6 percent in late 2024, which is better than many expected. Downtown SF is still struggling, but suburban and mixed use centers are coming back. People want experiences. Restaurants, wellness, and services are the new anchors, not big boxes.
Lenders are still cautious. Retail projects with solid leases and good co tenancy are getting done, but they need to pencil out early. There’s also a clear shift toward mixed use, retail on the ground floor, apartments or offices above. Cities are supporting these types of developments with smoother zoning and faster reviews
If I had to sum it up: we’re building smarter, not bigger.
Planning early matters more than ever. Teams that collaborate up front design, estimating, permits, phasing are the ones keeping their projects on track. Owners who understand how labor and material dynamics affect timelines are going to come out ahead.
There are still plenty of challenges out there. But from what I see on the ground, Northern California’s commercial construction market is adapting, and doing it well.
We’ll dive into some of these sectors in more detail in future articles, including permitting tricks, design build best practices, and how to manage through rate volatility. But for now, this is the pulse I’m feeling in the field.
Need some more information regarding a project you’re pursuing?
Email me at: j.simile@similebuilt.com.
Joseph J. Simile
President, Simile Construction
209.545.6111
