Commercial real estate woes weigh on Santa Clara County property values

July 7, 2026 - 03:53

A struggling commercial real estate sector is dragging down overall property values in Santa Clara County, according to recent county assessments. The downturn, driven by high vacancy rates in office buildings and struggling retail spaces, has created a noticeable drag on the tax base that local governments rely on for services.

While residential property values have held relatively steady in many parts of the county, the commercial segment tells a different story. Office towers in downtown San Jose and sprawling tech campuses in Silicon Valley are seeing sharp declines in assessed value. Many companies have downsized their physical footprints, embracing remote or hybrid work models. This shift has left landlords with empty floors and little leverage to demand high rents.

The county assessor's office reported that commercial property values fell by several percentage points compared to the previous year. This marks one of the steepest drops in recent memory. Retail properties, especially shopping centers anchored by department stores that have closed, are also under pressure. Industrial and warehouse spaces have fared slightly better, but even those sectors are showing signs of cooling.

The ripple effects are significant. Lower property values mean less property tax revenue for schools, roads, public safety, and other essential services. Local governments are now bracing for tighter budgets. Some officials are calling for a reassessment of how the county funds its operations, warning that the current trend could persist for years.

For property owners, the situation is grim. Many are stuck with buildings that are worth far less than what they paid for them. Some are choosing to sell at a loss, while others are converting office space into residential units or other uses. The county is also seeing an uptick in appeals from commercial property owners challenging their tax assessments.

Experts say the recovery will be slow. Until demand for office space returns to pre-pandemic levels, Santa Clara County's commercial real estate market will likely continue to weigh on property values. In the meantime, local leaders are exploring ways to diversify the tax base and reduce reliance on commercial property taxes.