Silicon Valley office rents jump, construction surges

No Comments

Silicon Valley office rents jump, construction surges

SAN JOSE — A big jump in office rents and a modest shrinkage of vacancy levels has spurred a dramatic increase in construction of new office buildings, according to a new commercial property report.

More than 10 million square feet of new offices are under construction in Santa Clara County and Fremont, according to a report from Colliers International, a commercial real estate firm.

Driving much of the growth is the tech sector, the same industry that gave birth to Silicon Valley’s development boom in the 1970s. Decades later, tech remains the Bay Area’s principal economic engine.

“Silicon Valley remains the heart of California’s economic expansion and the region’s commercial property markets are reaping the benefits,” Colliers said.

The 10.6 million square feet under construction at the end of 2019 — a head-spinning amount of development that is the equivalent in size of five major regional shopping centers — isn’t likely to lead to huge blocks of space that remain empty for years.

A robust 75.9 percent of the 10.6 million square feet has been pre-leased to tenants even before the buildings have been completed, according to the new research from Colliers.

“Silicon Valley’s commercial property market prospered in 2019, a result of the region’s thriving technology-driven economy,” Colliers stated in its report on the South Bay’s commercial property market for the fourth quarter of 2019.

During the final three months of 2019, Silicon Valley office rents on a per-month basis averaged $5.18 a square foot, Colliers estimated. That was up 17.2 percent from the fourth-quarter 2018 average of $4.42 a square foot.

The 10.6 million square feet of office construction underway during the October-through December quarter was up 56.7 percent from the 6.8 million square feet that were being built during the similar final quarter of 2018. It’s also up 7 percent from the 9.9 million square feet being constructed in mid-2019.

The construction activity is widespread enough that after a decade-long drought for major office construction in downtown San Jose, two towers sprouted during the final seven months of 2019 in the urban core of the Bay Area’s largest city.

In June 2019, Abode began construction of a new office high rise that would dramatically expand the size of the tech titan’s existing downtown San Jose headquarters campus of three buildings.

In November 2019, veteran and savvy developer Jay Paul Co. launched the construction of a new site that was the first office tower in 10 years being built by a developer on a speculative basis.

Google is a key player in multiple projects to construct new offices.

In Mountain View, the search giant is constructing a futuristic office campus that consists of a striking canopied building near the company’s current Googleplex headquarters that will total 595,000 square feet when complete.

A few miles away, Google has leased the under-construction office portion of the Ameswell Mountain View project, agreeing to rent 222,000 square feet at 750 Moffett Blvd.

In north San Jose, Google has leased the first four buildings of a vast campus being developed by real estate firm Peery Arrillaga at the corner of North First Street and Brokaw Road.

Construction is underway on the four buildings and Peery Arrillaga is seeking city approval for a true mega campus that would total 2.25 million square feet — enough room for 11,000 workers. It’s entirely possible that Google could wind up leasing the entire complex.

Even with the boom in new office construction, the vacancy rate in Silicon Valley is shrinking. At the end of 2018, office vacancies were at 10.5 percent, but by the end of 2019, they had improved to 9.8 percent, Colliers estimated.

Colliers experts believe the robust times for the office market in Santa Clara County and Fremont won’t fizzle any time soon.

“Confidence in Silicon Valley’s office market remains sound,” according to the Colliers report. “The outlook for Silicon Valley offices remains positive.”


as per our monitoring this Story originally appeared

* : ) here → *

Silicon Valley office rents jump, construction surges


Leave a Reply

Your email address will not be published. Required fields are marked *

Password generation