"The overall vacancy rate in the San Jose area is about 4.7%," says Friedman, "so it's not exactly what I would call an open market. There is still several million square feet of sublease space available, but the idea of excess is just not the case."
Ritchie Commercial Real Estate owner Mark Ritchie says the market is definitely softening, but the sky is not yet falling. "I guess the $64-trillion dollar question is whether or not the market is going to drop," says Ritchie. "There is definitely an impact in the market and there has been a major correction in commercial rents but the business isn't gone yet."
Ritchie believes that there has been a greater impact of the markets in San Francisco and the Palo Alto areas where commercial rents are much higher than those in the Silicon Valley. "I do believe there will be a suspension by summer's end," says Ritchie. "What you are seeing right now is the law of real estate physics: the higher the rents the faster the fall."
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