WESTERN SNAPSHOT, MAY 2011
The tech boom is lifting all boats in the San Francisco Bay Area. Led by a surge of demand from tech users (especially those in the fields of cloud computing, smartphones and social networking), the San Francisco and Silicon Valley office and R&D markets appear to be in the early stages of yet another boom. Demand and deal activity are up for both office and R&D properties along the Highway 101 corridor from Mountain View in the Silicon Valley to Market Street in San Francisco.
In San Francisco, these trends have equated to more than 460,000 square feet of office occupancy growth during the first 3 months of this year. Office vacancy had peaked at the mid-year point of 2010 at 15.7 percent, but now stands at 13.9 percent. In the Silicon Valley, this trend has played out with a slew of mega-deals from users like Facebook, Hewlett Packard, Motorola and others. The Silicon Valley office market recorded roughly 1 million square feet of net absorption in the first quarter as vacancy crept downward to 17.1 percent. The R&D market in the Silicon Valley also has booked a stellar quarter, with more than 30 leases for 30,000 square feet or more inked during the first 3 months of the year. Vacancy for R&D product is also on the downswing, standing currently at 18 percent.
Look for these trends to not only continue, but escalate heading deeper into 2011. Throughout the Bay Area there is more than 10 million square feet of active user requirements for office or R&D space. This number is up by more than 30 percent from last year, but continues to increase.
— Garrick Brown is Northern California Research Director at Cassidy Turley BT Commercial.
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