PALO ALTO, CA-As GlobeSt.com reported this morning, Studley's Silicon Valley office market sustained its dynamic performance in the fourth quarter of 2012 as steady hiring and anticipated expansion among the region's top employers and up-and-coming start-ups fueled demand for office space. And according to the report, as new construction comes to the market and supply begins to increase in late 2013 and through 2014, large tenants will be afforded more opportunities in Silicon Valley's top-tier submarkets.
“An associated benefit is that as development takes off, municipalities have been leveraging these projects to fund much-needed public infrastructure improvements,” says George Fox, Studley senior vice president and branch manager of the firm's Silicon Valley office.
Smaller to mid-sized tenants still have an abundance of options, particularly if they are geographically flexible, but should also be prepared for tightening concessions and increased rents as the technology industry expansion continues, says Fox.
Both tenants and investors are turning to purchasing buildings as one way to leverage the tightening marketplace, says the Studley report. ROHM Semiconductor bought an approximately 37,000-square-foot office/R&D property at 2323 Owen St. in North San Jose for $5.9 million or $157 per square foot. The Japanese company plans to occupy approximately 18,000 square feet and lease out the balance. Another example is Oplink Communications' acquisition of the 86,000-square-foot R&D/flex property at 1710 Fortune Dr., also in North San Jose.
Investors are capitalizing on acquisition opportunities as well, with a focus on buying properties with significant vacancy, says the report. Westport Capital Partners bought Montague @ 880 in North San Jose from EOP for $16.8 million ($83.50 per square foot). The three-building complex totals 200,000 square feet and had a vacancy of 77% at the time of the purchase. According to the report, there were five transactions in the fourth quarter of more than 100,000 square feet, including San Diego-based ServiceNow leasing 148,704 square feet in three buildings at 3250-3270 Jay Street in Santa Clara.
The other four were Palo Alto Networks' 301,163-square-foot lease at 4301-4491 Great America Parkway in Santa Clara; Apple's 295,500-square-foot transaction at 5403 Stevens Creek Blvs., also in Santa Clara, and its 116,586-square-foot transaction at 410 N. Mary Ave. in Sunnyvale/Cupertino; and Netflix's 137,500-square-foot lease at Winchester Blvd. & Albright Way in Campbell/Los Gatos.
Market highlights include:
* Overall asking rent stood at $2.62 per square foot, per month, up by 2.7% for the quarter. The class A rate, $2.74, registered an increase of 0.9%.
*Overall net absorption totaled 293,836 square feet, down by 67.4% for the quarter. On a trailing four-quarter basis, overall net absorption equaled 3.3 million square feet, an increase of 2.5%.
*The trailing four-quarter leasing volume totaled 6.2 million square feet, a drop of 17% for the quarter.
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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.
