GlobeSt.com looked to Manatt’s Michael Polentz , co-chair of the firm’s Real Estate and Land Use Practice, for insight into the dramatic leasing activity in the Silicon Valley, which hasn’t been seen since the dot-com era.
GlobeSt.com reports that Silicon Valley’s status as the “most dynamic and rapidly tightening U.S. office market” continues, and a huge increase in development activity is taking place due to shrinking vacancies throughout the area.
“From 2008 to the middle/end of 2011, there was a complete stoppage of new-development activity for class-A office space, and that was largely a function of lack of construction debt from the lenders’ perspective,” said Polentz. “Nobody was willing to do any spec development unless they had a tenant lined up. But by the end of 2011, leasing activity of existing product started moving at lightning speed. This was due largely to the low vacancy rate, and we had some large tech players that were presumably looking out strategically three to five years, recognizing that there was not a lot of existing product available, so they started gobbling up space.”
In 2011, the absorption rate of existing office product in Silicon Valley was approximately 2.7 million square feet, an amount that has not been absorbed here since the dot-com era of the 1990s, Polentz added. Silicon Valley currently has about 10 million square feet of existing office product in the pipeline, and roughly one million square feet of that will start or complete construction in 2012, “so there really is a movement to capture some of the energy and the fast-paced environment of what’s being taken down from larger tech players in the Silicon Valley,” said Polentz.
Read the article here.