Five Ways Asia Pac is Changing Silicon Valley
Asia Pac interest in Silicon Valley is getting hotter by the day—and where some are signing may surprise you. We met with new JLL power brokers Sofi Choi and Steven Chon (who speak enough languages between the two to fill up a Rosetta Stone set) to learn five ways the market is changing.
1) A new wave of tenants is coming.
The new SVPs, who were hired from Cassidy Turley, have a history growing Asia Pac firms in Silicon Valley. In the late '80s and '90s, Steven saw a lot of migration from Japan. Now he's seeing more South Korean companies coming here, while Chinese and Taiwanese companies are expanding from existing footprints of sales offices to major R&D centers as Asia Pac firms amp up competition in the consumer product categories. Why Silicon Valley? (Besides the food?) It's the brain of the IT world and companies want to have a pulse on the latest and new technologies, he says.
2) Brand is driving real estate footprints.
Sofi and Steven's largest client is Samsung, a good example of a company that's been here for over 20 years but has made significant investment across the US to build a brand image and to gain advantage of technologies in Silicon Valley. They just worked with the electronics giant, consulting on their future 1M SF HQ in San Jose (below). Sofi and Steven have their own desirable broker brand; she's a native Spanish and Korean speaker; English is her third language and French is her fourth. (We think the only person who speaks more languages is Pope Francis.) Steven also knows Korean.
3) Fremont and North San Jose are getting a boost.
Hardware companies are more cost-conscious than the latest software startup with $500M VC dollars and a foosball table. North San Jose provides a nicer image and HQ type you'd see in Mountain View but at a better price tag, Steven says. In the past 18 months, Fremont has seen close to 1M SF in purchases or leases from companies in China and Taiwan. More companies—especially those with a manufacturing or hardware component—can't justify spending $4 to $5/SF to sit in Palo Alto; they're going across the bridge to pay a third of that and then find ways to reimburse employees for transit.
4) Space is being upgraded to attract them.
Buildings from the the '80s and '90s are being reincarnated from their former lives as heavy power manufacturing facilities into remodeled gems with new facades and landscapes. (Above, Bixby's THE Campus, a newly renovated 250k SF office park in San Jose looking for tenants, especially ones who like to make s'mores.) What was formerly 20% office and 80% manufacturing ratios are now being flipped, he says. Landlords in the game include Bixby, Lane Partners, M West, and Boston Properties, he says.
5) Landlords are targeting single tenants.
Campuses being redeveloped in San Jose are targeting single tenants. That means we're going to run out of space for the smaller or mid-size office user, Steven says. Properties are being marketed in the 60k to 100k SF footprint, and those formerly taking up a third of a 60k SF block are going to be pushed out and priced out of Santa Clara, he predicts. That's making Milpitas get more action. Prologis in Bayside is less than 10% vacant—the result of more companies fleeing North San Jose to drive five miles up the freeway and pay half the rent.