SUNNYVALE, CA-Silicon Valley seems to be defying the national trend of the real estate markets reeling from high unemployment and thanks to its thriving tech industry, commercial real estate in the area is a proven bright spot. At least that is the consensus of recent market reports from the area. For example, a Q2 Grubb & Ellis report points out that the Silicon Valley office market continued to gain leasing momentum in Q2, largely credited to intense demand from social media, mobile computing and technology companies and as a result, net absorption had a positive increase of approximately 145,000 square feet from last quarter and over half a million square feet when compared to this time last year.
Randy Gabrielson, executive vice president of Cornish & Carey Commercial Newmark Knight Frank and manager of the company’s Palo Alto office says that “We’re seeing a high concentration of technology companies that are using Palo Alto and the downtown area for recruitment tools, which is causing a spillover effect into Sunnyvale and the surrounding areas,” he says. “This market is faring significantly better than other areas around the country, and we’re cautiously optimistic it will continue on this trend.”
Among the many corporations that recently expanded or set up shop in the nation’s technology capital are Google, Dell, VMware, Facebook, Box.net and coupon website Groupon Inc., which recently made headlines when it leased a 40,000-square-foot space in Palo Alto. With the demand for high quality, large campuses accelerating, several developers have revealed plans to begin or resume construction projects in Silicon Valley, says the G&E report. The report points to Jay Paul, who intends to start construction on the final 250,000-square-foot building at his Moffett Towers project, which has seen a lot of tenant interest this year, according to G&E. Sobrato, one of the Valley’s largest building owners, is set to resume construction on two buildings totaling 306,000 square feet in Santa Clara with a goal to deliver in 11 months. Dostart has also begun the process to gain government approval to increase their currently owned site on
Highway 237 to 680,000 square feet.
In contrast to the nation’s average 3.6% decline in housing prices reported by S&P/Case-Shiller’s index of property values, the Silicon Valley is experiencing a 5.3% increase from this time last year, due largely in part to the aforementioned strength and growth of local tech companies, according to Coldwell Banker Residential. With recent IPOs like that of social media giant LinkedIn fueling the upsurge, the median home price in Palo Alto currently stands at $1.63 million, a 20% increase from this time last year revealed research company DataQuick. Similarly, Mountain View housing prices saw a 3.1% growth to $957,500 while Sunnyvale residences increased in price to $732,500, up 1.3% from February of this year per reports from Zillow.
“More IPOs come from Silicon Valley than anywhere else in the country, so it’s not surprising that employees at these tech companies have cash to buy homes, which creates steeper competition,” Gabrielson says. “As more firms go public, real estate prices are expected to continue to remain strong, especially in the wake of Facebook’s impending IPO, anticipated sometime in early 2012, he says.
While this technology-fueled real estate upsurge is expected to last into 2013, according to reports, the results are visible across the Silicon Valley. In Sunnyvale, for example, Fusion townhomes by O’Brien Homes are evidence of how the residential market is gaining strength. Since opening March 26 of this year, the townhome community has booked 19 sales of townhomes ranging from $450,000 to $630,000. “Right now we’re seeing an influx of buyers who are looking to invest in a home,” says Jerry Dornseif, sales manager at Fusion. “Since rents in the area are high and still climbing, people are finding that they can get a better value when they buy their own home, and many of them have made their way here to Fusion. We’ve even sold homes before we had any models for buyers to view. If anything, I would say this is an indication of the rising economy here in the Silicon Valley.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
