It may be a situation that every corporate end-user was hoping to see. Lots of space available in one of the most prominent technology markets in the world, right next to an international airport, access to highways, housing, retail and amenities. Yet, the speed at which this space gets leased up, and the size of the chunks bitten off by corporate users, will likely be a leading indicator in the health of the Silicon Valley leasing market, especially since nearly 300,000 of that space is a sublease by an industry stalwart.
Hudson Pacific’s Cloud 10 building, which offers 369,000 square feet of brand new, campus-sized office space, sits just east of the San Jose International Airport. The building was designed by Gensler and offers a modern amenity-rich setting that could be the pride of any corporation wanting to make it its new home. There is a 5,000 square-foot sky deck in addition to an 8,000 square-foot amenity building that features a dining hall and a fitness center. The floors feature 38,700 square feet with additional outdoor workspaces and secure parking.
On the other side of the airport, Hunter Properties’ 1199 Coleman Ave., which is leased to Yahoo, is a brand new trophy office project part of the company’s Coleman Highline development. The media tenant just put on the sublease market 296,000 square feet of the space they lease there, which will not be available until December of 2021, when Yahoo can take occupancy of the space and its lease commences. This property was also designed by Gensler, and it is part of the largest transit-oriented office development in Silicon Valley, according to the firm’s property page. It offers 78,000 square-foot floor plates with outdoor terraces, amenities and parking. According to industry reports, the property is also in the midst of an ownership transition. AGC Equity Partners has agreed to purchase the property from Hunter Properties, although that deal has not been finalized, yet.
Both properties are offered by the Silicon Valley office of CBRE, providing a rich offering for the market by this one brokerage firm. The firm has not responded to a request for comment prior to publishing.
With these two properties, nearly 670,000 square feet of direct availability is on the market in a very small subset of the north San Jose market, and how quickly it gets leased up will be an indicator of the health of the leasing activity.
The Yahoo sublease represents nearly half of the company’s total lease at Coleman Highline, which the it announced in 2019 is 640,000 square feet. Placing that much space on the sublease market by a large international tech company is also an indicator of what the company feels it will need going forward.
Yet, big block availability has been a challenge across Silicon Valley in the past, and especially the type that is newer with close proximity to transportation located near amenities. According to a recent Silicon Valley Office, Q2 2021 market report by CBRE, the office market experienced a pronounced rebound, or around two million square feet of leasing transactions during the second quarter of 2021. That followed the slowest leasing period in history, according to CBRE.
The Registry’s own reporting saw Apple take over 700,000 square feet in May of this year at Irvine Company’s Pathline Park in Sunnyvale. NetApp took about 300,000 square feet in Santana Row and Dell another 153,000 square feet in Santa Clara. But moving another 670,000 square feet may prove to be more difficult.
CBRE sees the vacancy rate in Silicon Valley still hovering just over 10 percent and leasing rates have held steady, while another 8.5 million square feet of space is under construction.