Tech firms leasing more space
SUNNYVALE >> Meta’s huge leases in Sunnyvale and Burlingame, inked a few months after a big Apple lease in Sunnyvale and the same day as a San Jose mega property sale, might show that fears of a tech exodus are overblown, experts say.
Since the outbreak of the coronavirus and the start of business lockdowns in March 2020, gloomy assessments about Silicon Valley’s prospects have emerged on a regular basis, with predictions that corporate exodus and empty offices would turn the region into an economic graveyard.
To be sure, some highprofile tech companies have shifted their headquarters from Silicon Valley to costfriendly states, partly in a quest to escape California’s sky-high taxes and regulatory rules. Oracle, HP Enterprise and Tesla have all disclosed decisions to pull up stakes and move their head offices to Texas. On Thursday, Tesla told securities regulators that it had officially moved its headquarters from Palo Alto to Austin, Texas. Palantir Technologies decided to move to Denver.
However, it has also become apparent that tech companies of all sizes are expanding in the Bay Area.
“There is no exodus,” said Phil Mahoney, an executive vice chairman with Newmark, a commercial real estate firm. “Experts always exaggerate what’s happening, both the ups and the downs. Tech companies are not leaving Silicon Valley.”
Among the recent major deals:
• Meta Platforms, whose apps include Facebook, leased 719,000 square feet in northern Sunnyvale at a four-building campus near the corner of Crossman Avenue and Caribbean
Drive, executives disclosed Wednesday. The lease was arranged through Newmark brokers Mahoney, Michael Saign and Jon Mackey.
• Meta also leased 520,000 square feet in Burlingame on Airport Boulevard in a project known as Peninsula Innovation Point, in a deal also revealed on Wednesday.
• Apple in March leased 698,000 square feet at Sunnyvale’s Pathline Park, agreeing to rent several buildings in a deal arranged by commercial real estate firms CBRE and Cushman & Wakefield.
• Apple is also pushing forward with a new campus in north San Jose.
• Tesla has rented a big office building in Palo Alto, a deal that was made even after the electric vehicle manufacturer’s chief executive Elon Musk said the company would move its headquarters to Texas. Tesla is keeping its vehicle factory in Fremont, at least for now.
• London-based investment giant AGC Equity Partners paid $780 million for three buildings in a section of the Coleman Highline mixed-use tech campus in north San Jose. That was the most money paid for a commercial real estate property in Silicon Valley so far in 2021 in a single transaction.
• Google is pushing forward with a big new mixeduse neighborhood in downtown San Jose, new office hubs in north San Jose, and major development projects that will create campuses in Mountain View and Sunnyvale.
“We count a sum total of four Silicon Valley companies that have moved their headquarters in the past 18 months, and from our standpoint, four data points aren’t enough to call it a trend,” said Russell Hancock, president of Joint Venture Silicon Valley. “All four of those companies have backstories, and their reasons seem to be fairly particular to the piques of their CEOs.”
And even for those four, it appears the headquarters relocations that have occurred won’t erode the huge employment hubs the companies have in Silicon Valley.
“What’s most telling is that the workforce is still here,” Hancock said. “Take Tesla for example. Mr. Musk left for Austin but the rest of his team is still right here where he left them. In fact, they’re expanding in Palo Alto.”
The Meta lease in Sunnyvale is not only a major deal for Silicon Valley, it’s the largest office rental deal of 2021 in the entire United States, according to several top experts, including Mahoney.
“Tech companies will continue to grow here given the extraordinary talent pool in Silicon Valley,” Mahoney said.
The leases also suggest that companies are bullish on returning their workforces to centralized offices on at least a part-time basis, despite workers’ growing affinity for home office situations arising from the pandemic.
“The virus will pass,” Mahoney said. “It’s a productivity tool to be here.”
Overall, things appear to be looking up for Silicon Valley’s tech sector and commercial property markets because of the tech industry’s renewed appetite for office space and expansion.
Additional major leases could be in the works for the Sunnyvale area and are expected to be completed in short order. By some estimates, upcoming rental deals could total 1.2 million square feet in Sunnyvale alone.
“The news of Silicon Valley’s tech exodus is greatly exaggerated,” said David Sandlin, an executive vice president with Colliers, a commercial real estate firm.