SAN JOSE—Dave Schmidt, executive vice president with Colliers International, says Silicon Valley's commercial real estate markets recorded another good year in 2017, and it's not running on fumes yet. This was the word at the Colliers' Trends event that Schmidt recently moderated.
The office, R&D, industrial and warehouse markets have been active during the first quarter of this year and there is demand for projects under construction or recently completed. Developers are constructing about 4.1 million square feet of commercial space across the Valley.
“Demand is coming from blue chip companies as well as startups and we still have great employment numbers to support this activity,” Schmidt tells GlobeSt.com. “Neither of the economists that spoke at our Trends conference are concerned about a recession any time soon, however, beyond the third quarter of this year, we are advising our clients to exercise caution, if only because we've been on such a good run for so long. Even so, we expect 2018 to be another robust year.”
The 2018 Silicon Valley forecast built by consensus from Colliers professionals who specialize in these sectors covers office, R&D, industrial and warehouse product, GlobeSt.com learns. Office gross absorption is forecast at 8 million square feet and net absorption at 3 million square feet, with the availability rate down to 9%. San Jose's average starting rates for office ($3.60 per square foot per month) is about a dollar less than the Valley average and a whopping $4.20 lower than Palo Alto.
R&D gross absorption is forecast at 9 million square feet and net absorption at 1.5 million square feet, with the availability rate at 9.8%. The industrial gross absorption is forecast at 2.5 million square feet and net absorption at 750,000 square feet, with an availability rate of 3%. Warehouse gross absorption is forecast at 2 million square feet and net absorption at 500,000 square feet, with an availability rate of 3%.
A 155,000-square-foot manufacturing/warehouse project that just got underway at 448 Piercy in South San Jose will provide some relief. However, developers are always looking for elusive industrial development opportunities throughout the city.
Christopher Thornberg, a founding partner with Beacon Economics, thinks 2018 will be another growth year with a low chance of recession in the next 24 months, but is troubled by labor shortages and political instability. Greg Valliere, chief global strategist of Horizon Investments, provided the latest from Washington. And Marc Maiona, CEO of LeaseCalcs LLC, provided updates on regulatory changes affecting lease reporting on balance sheets.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
