By Meghan Hall
Electronics and semiconductor company Veeco Investments is planning ahead for its future, even as many of other companies have pressed pause on major commercial real estate decisions. According to a recent SEC filing, Veeco has agreed to take 96,780 square feet of space at 355 East Trimble Road in San Jose. The research and development property is owned by Trimble-Junction Ventures LLC, an entity affiliated with Chicago-based Highlands REIT Inc., according to the documents.
Veeco is looking to the future with its new lease, which has a term of 16 years beginning in January of 2022. The lease is on a triple-net basis, and filings indicate that base rent under the lease will come to $2.13 per square foot per month, totaling more than $2.473 million annually. Rents are subject to three percent increases each year. Veeco has also been granted abatement of its base rent for the first full year of its lease term, and partial rent abatements on 16,780 rentable square feet, 11780 square feet and 6,780 square feet, in the second, third and fourth years of the lease, respectively.
The company will also have two consecutive options to extend the lease by three years each, at a base rent equal to 95 percent of the market’s value. Like the original 16-year agreement, base rent will increase by three percent every year during the extension terms.
Prior to the commencement of the lease, Veeco will have access to the premise on a rent-free basis between April and December of this year as it pursues tenant improvements around the property. Veeco has been granted a tenant improvement allowance of $70.61 per rentable square foot for tenant improvements to the property.
Brokerage firm CBRE represented Veeco in the deal, while Cushman and Wakefield represented Highlands REIT.
The flex and R&D space sits in between State Route 101, Interstate 880 and the Montague Expressway, three of the main transportation arteries that run through San Jose. A number of other companies are located nearby, with ON Semiconductor located next door, while Comet Technologies and NBC Bay Area, among others, are all located within a few blocks.
Currently, Veeco is headquartered in Plainview, N.Y. However, the company also has an office at 3050 Zanker Road, also in San Jose. The property is currently home to Veeco’s advanced packaging, lithography, laser annealing and 3D inspection divisions. It is unclear whether Veeco will vacate its current home upon moving to East Trimble Road, or whether it is expanding its presence in the Bay Area.
By the end of the fourth quarter of 2020, Silicon Valley’s R&D market was not untouched by the impacts of the coronavirus pandemic. The vacancy rate climbed to 12.1 percent, according to a report released by Cushman and Wakefield, up from 9.5 percent in 2019. The increase marked the first time vacancy rose above 12 percent since the third quarter of 2014. Currently, there are about 20.5 million square feet of vacancy.
Deal velocity, while up slightly at the end of the year, remained at record lows. 2.4 million square feet of leases were signed during Q4, a direct result of companies continuing to postpone all but the “most essential” real estate decisions, stated Cushman & Wakefield. Despite the rise in vacancy, rates remained fairly consistent. At the end of the year, asking rents came in at $2.77 per square foot on a monthly, triple-net basis. Cushman and Wakefield predicts that R&D vacancy will increase, and rents will decrease, as 2021 gets underway if deal velocity remains subdued.