Silicon Valley View Part 1

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July 20, 2016

By: Christan Basconcillo, Research Manager, JLL

Despite a new report card on the region’s economic health calling out traffic congestion and housing affordability as two of the biggest problems facing Silicon Valley’s growth track, its reputation as the premier innovation hub in the world seems secure, at least for the foreseeable future.

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Big name users continue to dominate the headlines in Silicon Valley and the Valley’s latest innovative expedition into automotive technology is driving forward apace. Several firms have recently planted their flags in North San Jose, removing large chunks of space and redevelopment opportunities from the market and spurring leasing activity among suppliers and service providers.

Developers are responding with new speculative office projects, several of which have broken ground this year.  But, like San Francisco, pre-leasing activity has slowed as companies digest existing real estate commitments and users, particularly VC firms, dial back the aggressive space-banking of the last few years.

The good news is the market likely still has enough steam to push it through the cycle for another 12-14 months.  We are tracking several 200k-plus requirements and there are many full floor tenants in the market for blocks of space from 20-40k throughout the Valley.  Further ‘disruptive’ initiatives such as the formation of a “start-up friendly” stock exchange, may hold even greater promise for the Valley’s CRE market.

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