By Brittney Sherman
Commercial Real Estate and Business Conditions
Morgan Hill’s commercial real estate market has entered a stabilization phase following two years of higher interest rates that reshaped financing conditions, particularly for speculative projects. Over the past five years, the city has delivered nearly one million square feet of new light industrial space, significantly expanding local inventory. Recent deliveries and tenant turnover have increased availability, creating opportunities for businesses seeking modern facilities that were previously difficult to secure.
Outside of industrial development, new commercial construction has been more measured, with higher borrowing and construction costs influencing project timing and scale. Retail and service-oriented properties continue to perform best in areas with strong foot traffic. Restaurants and personal services remain active, though operators are navigating higher labor and operating costs. Across sectors, businesses are operating more cautiously, prioritizing efficiency, lease renewals, and targeted reinvestment over rapid expansion. Consumer spending has moderated, particularly for discretionary goods, while demand for services and dining has held up more consistently.
What This Means for Morgan Hill
Overall, Morgan Hill’s economy is adjusting rather than contracting. The addition of nearly one million square feet of new light industrial space has shifted the market from scarcity to increased choice, giving businesses greater flexibility while increasing the importance of pricing, building quality, and absorption. Higher operating and financing costs have led firms to be more deliberate, focusing on efficiency, right-sizing, and targeted reinvestment. With growth moderating and financing conditions improving modestly, pointing to a more balanced and sustainable economic environment.