It’s no news that speculative development is back in Silicon Valley, but the speed at which the market is consuming it is indicative of its continued strength and the region’s enduring good fortunes driven primarily by tech employment. The following list of 11 top speculative projects under construction in Silicon Valley outlines a geographical heat map of where developers see the strongest demand for new office space in the region, and it is telling of their confidence to lease it up.[table] Project, Developer, City, Square Feet
Moffett Gateway, Jay Paul, Sunnyvale, “597,848”
237 at First, South Bay Development, San Jose, “368,000”
Coleman Highline, Hunter/Storm LLC, San Jose, “357,106”
The Offices @ Main St, Sand Hill Properties, Cupertino, “274,288”
500 Santana Row/The Offices at Santana Row, Federal Realty, San Jose, “233,000”
Stadium Techcenter, Spearstreet Capital, Santa Clara, “226,500”
Legacy on 101, Legacy Partners, San Jose, “225,000”
433 Mathilda Avenue, Herman Christensen, Sunnyvale, “213,117”
600 National Avenue, Lamb, Mountain View, “145,906”
3303 Scott Blvd, Toeniskoetter Development, Santa Clara, “82,000”
479 North Pastoria Ave, Peery Arrillaga, Sunnyvale, “52,394”
The market is presently tracking demand somewhere between 11 to 13 million square feet of office space in Silicon Valley, according to Todd Shaffer, managing director of Newmark Cornish & Carey’s Santa Clara office. Shaffer is part of a team that is leading the charge on leasing 500 Santana Row, a new office development that Federal Realty has kicked off recently.
“We’re getting lots of activity, once we started construction,” Shaffer said. The new 233,000 square foot building at Santana Row is just the first phase of a three building development that can be up 735,000 square feet, once completed. The primary attraction of the location is the mixed-use urban neighborhood of Santana Row, which now features a mix of office, hospitality, retail and housing options. The development will reinforce that by creating a non-traditional steel structure with high ceilings and expansive open floor arrangement, said Shaffer. It’s just the kind of thing tech firms are searching.
“There is no major construction in the [highway] 280 west corridor, and there is a strong desire to look at alternatives to the [highway] 101 corridor due to traffic,” said Shaffer.
Dave Sandlin, executive vice president of Colliers International in its San Jose office concurred. “Demand hasn’t ceased, and we haven’t gotten to the frothiness that was here in the dot-com bubble.” Sandlin sees the positive news being that things are holding steady. Tech giants like Apple and Google have not really reduced their appetite for office space, which will translate into sustainable growth over the near to mid-term throughout the region. Spec development plays an important role in keeping the balance steady, otherwise lower supply could spike up leasing prices, which in turn makes corporate clients to rethink their growth strategy. “I like things to hold steady,” Sandlin added.
Some of the projects on the list have already been leased. The Sand Hill Properties’ project in Cupertino, The Offices @ Main Street, for instance, has been pre-leased to Apple, and Sandlin believes all the others on the list will be pre-leased before they are completed.
Older, redeveloped buildings typically maintain issues that they have had for years, and the amenities, high ceilings and large floor plates are just impossible to recreate unless the building is totally torn down, he said. Naturally, companies gravitate toward the newer products.
“For some of the redeveloped properties, there are problems with the properties,” said Sandlin. ”With these new buildings, you have a clean slate to work with, and tenants almost always migrate toward the new building.”
For once, the speculative developments seem to be a low risk venture in Silicon Valley. “If it was existing (referring to the list above), it would be incredibly easy to lease,” concluded Shaffer.