Biotech companies’ rising demand for R&D space hasn’t wholly eclipsed other tech uses.

VEECO Instruments Inc., which supplies tech equipment including semiconductors, photonics, data storage and scientific devices, just leased an entire building at 355 East Trimble Road in North San Jose, according to a Securities and Exchange Commission filing. The deal harkens back to Silicon Valley's origins fueled by a strong R&D sector rooted in semiconductor manufacturing.

The landlord listed as Trimble-Junction Ventures LLC in the filing has an address listed in the lease document for Highlands REIT Inc. in Chicago. Based in New York, VEECO occupies an office/R&D building less than a mile away at 3050 Zanker Road.

The agreement allows VEECO to start tenant improvement work on the 97K SF R&D/light industrial building on April 1. The 16-year lease begins in January 2022 and includes base rental payments of $2.13 per SF and comes with a three-year extension option and an annual 3% increase in base rent. The lease includes a provision for full base rent abatement during the first year, with partial abatement decreasing incrementally until the fourth year, and a tenant improvement allowance of $6.8M. The permissible property uses include manufacturing, laboratory, warehouse, R&D and office.

VEECO’s operations represent a more traditional use of R&D space that is increasingly being sought after by biotech companies, especially farther north on the Peninsula. The vacancy rate for R&D in Q4 2020 in Silicon Valley was 8.6%, according to a CBRE report with lease rates at $2.72 per SF, which was flat from the previous quarter.

The report also showed that Silicon Valley’s R&D sector experienced five consecutive quarters of occupancy losses, ending the year at a negative 474K SF net absorption. North San Jose had a Q4 vacancy rate of 14.9% and net absorption of 16K SF. The report also noted that biotech companies made up 30% of the top 25 R&D leases signed in Q4 2020, similar to national trends.