Tech boom drives fresh property surge
Companies maintain appetite for office space in Silicon Valley
SAN JOSE » Tech companies hunger for huge chunks of commercial properties in Silicon Valley, a remarkable expansion propelled by the combined appetites of Google, Apple, Facebook, and Amazon, experts at a closely watched real estate event said.
At present, about 12 million square feet of commercial property space — office, research, and industrial buildings — is under construction in Silicon Valley, according to information released Wednesday at the Trends 2020 conference held by Colliers International, a commercial real estate firm.
Despite the huge amount of commercial space under construction, there appears to be a decent chance that much of this property will fill up.
Heightened demand for
Silicon Valley commercial buildings is driving the construction surge. Currently, tenants are actively seeking a combined 11 million square feet of office space in Silicon Valley, Lena Tutko, senior research director with Colliers, said at the event in downtown San Jose Wednesday.
“We are not seeing a tech exodus any time soon,” Tutko said during her presentation.
Quite the opposite might be happening, according to Colliers.
“What we are seeing is tech companies not only are staying in the Bay Area, but they are expanding,” Tutko said. “We saw movement from San Francisco- and Peninsula-based companies into the South Bay.”
Leases by Airbnb in Santa Clara, Splunk in San Jose’s Santana Row, Uber in Sunnyvale, and Twitter in Santana Row are examples of tech companies from San Francisco establishing a major presence in the South Bay.
Colliers also estimated that in the decade that began in 2010, developers and companies added well over 40 million square feet of commercial property space in Silicon Valley.
The construction surge took the total amount of commercial space from 64 million to about 106 million square feet, according to Colliers.
“It’s been an incredible decade for both Silicon Valley and the Bay Area,” Reed Payne, executive managing director for the Colliers office in San Jose, said during his presentation at the event.
Plus, developers and tech companies alike have begun to gobble up the sites of aging research buildings with an eye to create major redevelopment endeavors on the properties, Payne said after the presentations had ended.
“You have the conversions of old one-story R&D buildings into big office buildings,” Payne said. “We had always talked about how these older buildings would have to convert to a higher and best use, and that has been happening over the last 10 years.”
The Colliers experts also pointed to the huge effect that just a few big tech companies have wielded on the commercial property markets in Silicon Valley, which Colliers defines as Santa Clara County and Fremont.
In 2010, Google, Apple, and Amazon occupied a combined 6 million square feet of office, research, and industrial space in Silicon Valley, Payne said.
Now, the four major local players, Google, Apple, Facebook, and Amazon, occupy 47.8 million square feet of commercial space, Tutko estimated.
“Google is without a doubt playing the starring role,” Tutko said.
Mountain View- based Google has 23.1 million square feet of commercial property space, Cupertinobased Apple 14.7 million, Menlo Park-based Facebook 6.4 million square feet, and Seattle-based Amazon 3.6 million square feet, according to Tutko.
Downtown San Jose is poised for dramatic changes, the Colliers experts said.
Google has proposed Downtown West, a transitoriented community of office buildings, hotel rooms, homes, shops, restaurants, cultural hubs, entertainment centers, and open spaces where the search giant could employ 25,000 people near the Diridon train station.
Adobe in June 2019 began construction on a new office tower on West San Fernando Street that would expand the tech titan’s downtown San Jose headquarters campus that now consists of three office highrises.
In November 2019, savvy developer Jay Paul Co. broke ground at 200 Park Ave. on a new office tower that is poised to become an iconic addition to the downtown San Jose skyline.
On March 4, Boston Properties and TMG Partners are slated to launch the Platform 16 tech campus of three modern office buildings at the corner of Autumn Parkway and West Julian Street that will feature 16 terraces among their amenities.
“When these developers saw that Google was planning a major development in downtown San Jose, they wanted to get out in front of that, because they know that where Google, Apple, or Facebook go, other tech companies want to be there as well,” Tutko said in the interview.
The robust requirements for Silicon Valley commercial appear likely to persist for some time, Colliers said.
“We don’t see a slowdown in demand for space,” Tutko said in an interview. “We see an extension of what is going on now.”