By Meghan Hall
Silicon Valley’s R&D market has been on a steady rise, finishing out 2018 with more than 1 million square feet of positive net absorption in consecutive quarters for the first time since 2014, according to CBRE. Now, heading into the second quarter of 2019, the momentum of the R&D market continues, with Netherlands-based ASML inking a 265,000 square foot lease across three DivcoWest buildings in North San Jose.
The story was first reported by the Silicon Valley Business Journal.
The tech company, which specializes in semiconducting and a process known as lithography, is slated to move into two buildings at 10 W. Tasman Dr. and 125 Rio Robles Dr. ASML will also occupy a third building, half of 80 W. Tasman Dr. The three buildings will eventually accommodate more than 900 employees, according to the report. Currently, ASML has about 750 employees in the area; the move will help the company consolidate its workforce, including those currently at 399 W. Trimble Rd. and ASML’s complex on Automation Dr., which it purchased for $3.1 billion in 2016.
The offices are located within what has been dubbed as the “Golden Triangle”; a 13.3-acre campus at center of North San Jose, near Interstate 880, State Route 237 and U.S. Highway 101. Samsung — one of ASML’s largest customers — has its newly-built North American headquarters directly adjacent to the site. DivcoWest purchased the property, vacant from Cisco, in late 2017 for $50 million, according to public records. Since then, DivcoWest, a company which focuses on acquiring well-located office, lab and R&D properties, has been renovating the buildings. ASML is anticipated to move into the buildings at the end of 2020.
According to CBRE, renovating existing value-add opportunities, such as the properties that ASML will be occupying, is an increasingly popular option for property owners when it comes to investing in R&D space throughout San Jose and Silicon Valley. With only 355,000 square feet of new product under construction, market-ready product is in extremely high demand and little relief is on the horizon.
“As market conditions continue to tighten, demand for market-ready space will remain competitive as tenants seek out space that will engage and retain their current and future workforce,” states CBRE in its Q4 2018 Silicon Valley R&D report. According to CBRE, the R&D real estate market will remain tight. Gross absorption totaled 4.3 million square feet at the end of the year, a 38 percent increase over the third quarter of 2018 alone, while the vacancy rate for R&D space in Silicon Valley dropped to seven percent, the lowest rate since the first quarter of 2001.