Sunnyvale: The Goldilocks of Silicon Valley

Silicon Valley real estate, Sunnyvale, Cornish & Carey, Phil Mahoney, Cassidy Turley, Gregory Davies, Iron Construction, Jay Paul, Moffett Park, South Bay

Sunnyvale real estate The Registry

By Michele Chandler

Apple, Google, LinkedIn and other technology titans are setting up shop in Sunnyvale, the South Bay city with the Midas touch when it comes to attracting the tech industry’s elite.

[contextly_sidebar id=”abedf368378a58c1008d5d6dbe8f2f9a”]Development-friendly regulations, the resulting collection of appealing new office complexes and a location not far from existing tech strongholds are all factors that have helped place Sunnyvale at the epicenter of a tech expansion boom.

For starters, there’s Google.

The Internet and software firm, already expanding on its home turf in Mountain View and in Palo Alto, spring-boarded into Sunnyvale in 2011. That’s when the company finalized a long-term lease agreement to occupy nearly 715,000 square feet of office space in four towers at Technology Corners at Moffett Park, a complex developed by realty firm Jay Paul Company.

Now that a fifth tower is complete, the complex includes one million square feet of office space, said Phil Mahoney, the principal executive vice president at Cornish & Carey Commercial Newmark Knight Frank who is marketing Technology Corners.

Asked about further expansion plans, Google spokesperson Meghan Casserly responded in an email: ”Google is an expanding company, and we’re always looking for the right opportunities to accommodate that growth.”

While already holding a sizeable swath of office properties across Sunnyvale, tech titan Apple Inc. is also beefing up its presence in the city. Apple recently leased a portion of a 290,000-square-foot campus on San Gabriel Drive that formerly housed Maxim Integrated Products, according to Connie Verceles, Sunnyvale’s economic development manager.

Exactly how much space Apple has committed to in the complex isn’t clear. Cupertino-based Apple did not respond to enquiries seeking comment about its plans.

During the past 24 months, Apple has leased about one million square feet throughout Sunnyvale, including within the 407-acre business and industrial area located northwest of downtown that’s known as Peery Park, an area bounded roughly by U.S. Highway 101, the railroad, the Mountain View border and Mathilda Avenue.

Fast-growing LinkedIn has also established its place in Sunnyvale. The Mountain View-based professional networking firm said that “several hundred” of its employees are now working in an office encompassing more than 120,000 square feet of space at 580 Mary Street that the company moved into in February.

That’s in addition to a seven-building campus on W. Mathilda Ave. near N. Maude Ave. LinkedIn is occupying four buildings there right now, while the remaining three buildings are not yet complete, said Mahoney, who leased the space.

Asked for an update, a LinkedIn representative said, “We continue to plan to grow our presence in Sunnyvale,” but declined to elaborate.

Other new tech arrivals in Sunnyvale include Illumio, a cloud security startup that city officials said filed a building permit in February for a 19,400-square-feet office property on San Gabriel Drive.

Brisk interest is expected to continue as Sunnyvale extends its formidable welcome mat to an industry that is ripe to expand.

Throughout the region, “there’s a lot of pent-up demand,” Verceles said. “I think there’s going to be a lot of movement and a lot of deals announced in the coming [fiscal] quarters. There are a lot of businesses out there with active requirements, and we’re waiting to see where everybody lands.”

Tech companies’ migration into Sunnyvale is no accident.

Within an easy reach of Palo Alto, Cupertino, Mountain View and Santa Clara, Sunnyvale’s location is a major draw. Some global tech firms, including Yahoo! Inc. and NetApp Inc., started up in Sunnyvale, a city known for available office space and reasonable leasing costs.

Other tech companies began scouting for additional office space beyond their home territories—but within an easy commute— once inventories near their headquarters grew too pricey or weren’t plentiful enough to absorb their growth.

With Silicon Valley’s tech and other industries on the rebound, office space vacancies are tightening across the region.

Sunnyvale’s office vacancy rate fell to 6.8 percent for the first quarter of 2014, about half the vacancy rate recorded during the same period two years ago, according to Colliers International.

In contrast, Cupertino’s office vacancy rate for the first quarter of 2014 was a super-tight 1.6 percent, while Mountain View reported a 3.7 percent office vacancy rate. Palo Alto reported a 6.7 percent vacancy rate, Colliers found.

For Silicon Valley as a whole, office vacancy rates have also declined, but not quite as steeply, reaching 11 percent in the first quarter of 2014, Colliers found.

In some cases, city regulations and lengthy approval times for new projects contribute to tech firms’ decisions to expand elsewhere rather than face hurdles in their own backyard, brokers said. Real estate sources repeatedly mentioned Mountain View and Palo Alto as hard places to get development projects approved.

“Some cities make it more difficult than others. This doesn’t seem to be the case with Sunnyvale,” said Chad Leiker, a vice president with Kidder Mathews, a commercial real estate firm. “It really helps developers and prospective new tenants when cities make it uncomplicated and accessible for redevelopment.”

Claudia Folzman, co-founder and executive vice president of Iron Construction Co., who recently relocated to Sunnyvale, said she found the city’s officials to be flexible when evaluating proposals from her company.

“They’re not afraid to make a decision,” she said. “They look at what their policies and procedures are. [But] they really try to accommodate the businesses they are working with.”

Even with all the attention to Sunnyvale’s success wooing tech firms, Gregory M. Davies, senior vice president at Cassidy Turley, says that does not represent “a seismic shift” in the region.

“Occupancy growth has picked up so buildings are getting full and all those companies that are filling them up are, for the most part, tech firms. But it’s not like a giant pendulum shift,” Davies said.

“It’s more of a function of the markets recovering. The first markets that recover in any given cycle are the ones closest to Stanford University and Sand Hill Road, and it flows outward from there in both directions. Now, it’s Sunnyvale’s turn.”

Photo courtesy of Sunnyvale Chamber of Commerce

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