Biggest year ever for commercial property deals
Office, research building deals in 2021 highest on record for Silicon Valley
SAN JOSE >> Silicon Valley's commercial property market powered to its biggest year ever in 2021, fueled by the highest dollar volume ever recorded for office building purchases, a new CBRE report shows.
Tech titans, investors and real estate developers scrambled to plunk down a head-spinning $8.71 billion to grab office buildings and research and development properties last year, reported CBRE, a commercial real estate company.
“2021's sales volume of $8.71 billion is the highest” on record, using research and databases compiled by CBRE and Real Capital Analytics that stretch back to 2002, said Sara Johnston, a spokesperson for CBRE.
The boom in Silicon Valley office space and research and development properties represented a dramatic turnaround from 2020, a dreary year during which investors scaled back activity amid economic uncertainties spawned by the coronavirus.
In 2020, coronaviruslinked business shutdowns, massive layoffs and other major shocks battered the economy and the commercial property market.
“Pent-up demand amid a recovering market resulted in 132 properties containing 15.1 million square feet changing hands,” CBRE stated as part of a report the company provided to this news organization.
The 2021 total of $8.71 billion was 81.1% higher than the 2020 sales volume of $4.81 billion. And the 2020 sales volume represented a 21.8% decline from the $6.15 billion in office and research building purchases in 2019.
The $8.71 billion is also 36% above the average purchase volume of $6.39 billion for the most recent five years from 2017 through 2021.
Purchasing activity boomed for Silicon Valley office buildings in 2021, although at a slightly slower pace than research and development spaces.
In 2021, buyers paid $4.83 billion for office buildings, which was 63.2% higher than the $2.96 billion they paid for office structures in Silicon Valley in 2020. The 2020 figure for offices was 9.5% below the 2019 figure of $3.27 billion.
Buyers paid $3.88 billion in 2021 for Silicon Valley research and development buildings, which was 109.7% — more than double — the $1.85 billion that buyers paid for such structures in 2020, and the 2020 building purchase volume was 35.8% below the $2.88 billion that was paid in 2019.
CBRE experts believe the transaction volume for office and research buildings is likely to remain robust.
“The inflow of capital to Silicon Valley's office and research and development investment market should continue to grow,” CBRE said.
That's because demand appears likely to persist for office buildings and research spaces.
“Tech and life sciences companies should ramp up their hiring, require more space and welcome back their workforces to their offices,” CBRE said.
The largest commercial property deal in 2021 in Santa Clara County was the $780 million purchase of three office buildings in December in a section of north San Jose's Coleman Highline tech campus complex. A London-based investment firm bought the buildings, which are leased to tech titan Yahoo.
The second-largest acquisition by value for 2021 was the $630 million purchase in March last year of two office buildings, a movie theater, and a parking garage in Mountain View. Facebook leases the office buildings.
To be sure, plenty of economic uncertainties loom, such as inflation and rising interest rates, which could choke off real estate activity.
However, signs have emerged that suggest 2022 could be a robust year for the purchases of office building and research properties, CBRE stated.
“Through the first two months of 2022,” CBRE said, “seven significant office and R&D sales have already been completed.”