News Column

Silicon Valley Commercial Real Estate Market Will Continue to Sizzle

Feb 14, 2013

George Avalos, Contra Costa Times

Silicon Valley's office and research leasing and development sectors this year look more robust than in 2012, according to a high-profile report released Wednesday.

What's more, the tech employment and expansion boom that has gobbled up office and research space at a dazzling pace the last couple of years is showing few signs of slowing down, the report released by commercial real estate firm Colliers International stated.

Companies are currently seeking a combined total of 7 million square feet of office and research space in Silicon Valley, Colliers reported during its annual forecast and presentation in downtown San Jose. That would be roughly equivalent to enough space for six or seven regional shopping malls.

About 4.5 million square feet of that space is being sought by companies looking for 100,000 square feet or more, said Jeff Fredericks, managing partner of the San Jose office of Colliers.

Another big help for the commercial real estate market in San Jose: Few companies show signs of consolidating or downsizing their office space.

"We have a lot more users taking space than leaving space," Fredericks said. "Sublease space is at an all-time low."

Colliers also reported that the tech boom is steadily moving south in the U.S. Highway 101 corridor. Facebook kicked off the latest surge of office leases and purchases with its huge campus plans in

Menlo Park. VMware occupied a big office complex in Palo Alto. Google (GOOG) gobbled up big chunks of space in Mountain View and Apple (AAPL) did the same in Cupertino. And both Google and Apple grabbed a number of large offices in Sunnyvale.

"The Sunnyvale office market continues to be the big story, first capturing headlines with a record-setting 2011 and following that up with another stellar year," Colliers stated in its report. "Big deals continue to be the story in Sunnyvale."

Besides Apple and Google, Juniper Networks and Lab 126 will occupy buildings this year that are being prepared for them, according to Colliers.

"The biggest beneficiary of the ever-tightening markets to the north was Santa Clara," the report stated.

It makes perfect sense that commercial real estate is seeing a surge, said Tim Bajarin, principal analyst with Campbell-based Creative Strategies, a market research firm.

"More and more companies are expanding, more startups are launching, because we are getting to the next phase of the Internet," Bajarin said. "Tech companies have a brand new platform they can work with, which is mobile."

"Silicon Valley is the hotbed for hardware, software and services that are being designed for mobile," Bajarin said. "Silicon Valley is in one of its strongest growth periods. This could last another four or five years."



Source: (c)2013 the Contra Costa Times (Walnut Creek, Calif.). Distributed by MCT Information Services.