Wednesday, April 27, 2011

Silicon Valley Office Market Booms

The Silicon Valley boom is back, as are increasing prices for office space.
Technology firms, from tiny start-ups to giants like Google Inc., are again racing to expand, sparking a turnaround in the Silicon Valley office market that seemed far off just a few months ago. The amount of occupied office space in the area is on pace to increase by three million square feet this year, which would be the biggest one-year jump since 1999, according to Jones Lang LaSalle Inc. Rents for the best space in the most highly desired market, downtown Palo Alto, are up 25% from a year ago, while the vacancy rate has fallen to about 7%, reports WSJ.

This will spread. Money may start in one place, or two, Wall Street and Silicon Valley but then it works its way through the economy.

Here's more from WSJ:

The surge of demand has transformed the Silicon Valley office market into one of the few showing signs of prosperity as the economy slowly recovers. As in New York and Washington, developers in Silicon Valley are dusting off plans for new projects, and the prices paid for office properties there are closing in on boom-era levels.

A downtown Palo Alto office building, once home to engineers developing the AltaVista search engine and the Java programming language, was sold this month to RREEF, Deutsche Bank's real-estate investment division, for $65 million, or more than $900 a square foot. That deal is in a tie with a sale in downtown Washington as this year's most expensive sale of a U.S. office building over 15,000 square feet, according to Real Capital Analytics...

Google added 1,916 employees during the first quarter of this year, bringing its total work force to 26,316. The company earlier this year said it would add more than 6,000 employees in 2011, an overall increase of 25%, as it continues to expand beyond its core Web-search business.

Facebook, meanwhile, is relocating to the one-million-square-foot campus built for Sun Microsystems in the 1990s.

Companies that are still looking for office space in Silicon Valley include communications company Polycom Inc., software maker Synopsys Inc., social-networking firm LinkedIn Corp. and bookseller Barnes & Noble Inc.'s Nook e-reader division, according to people familiar with the market.
In response to the new demand, Sobrato Organization, one of the largest office-building owners in Silicon Valley, decided recently to restart a 300,000 square-foot speculative office project in Santa Clara that had been on hold since 2008, says the company's head of real estate, Michael Field.

Some landlords who cater to start-ups and other smaller technology companies are benefiting from more venture-capital investment, which increased in 2010 for the first time in three years, according to the National Venture Capital Association. An office building in downtown Mountain View, at 444 Castro St., is now nearly 100% leased, thanks to a flurry of small deals in the last year with companies like start-up incubator 500 Startups and the nonprofit Creative Commons..html#ixzz1Kjm3v8Fq


  1. This may be partly due to the beginnings of inflation, but a large part of the Silicon Valley real estate and engineer boom is due to a new tech bubble that has been forming. Talk to any of the serial entrepreneurs in the tech world and they will tell you all about the free flowing VC money. Some firms are raising A, B, and C rounds at exponentially higher valuations within a matter of months with no increase in revenue to justify it. I spoke to an entrepreneur last week that was about to raise his C round even though he had 17 YEARS worth of runway and no major plans for it. This bubble will be quieter because it's happening in the private equity markets instead of the stock market.

  2. Uh, don't look now, but that money the VC's have might be from money printing. It didn't fall from a tree.

  3. "This will spread. Money may start in one place, or two, Wall Street and Silicon Valley but then it works its way through the economy. "
    what does this mean? that the economy is beginning to boom again? I was this might be the case, if you look at the new websites popping up like groupon, etc...and the smartphone popularity it may be a new boom. Are you saying that greener days ahead or are you saying this may just be another "crack up boom" thanks to the central banks?

  4. I trust he's saying the latter.

  5. Renting that place looks really great. Thanks a lot for sharing that information.

    rent serviced office

  6. Commercial real estate is more profitable when compared with residential, you hardly see the rental market going down, it always remain stable, nowadays people are more interested in getting a serviced office.