5 Reasons Silicon Valley is Booming
With over 10M SF of tenant requirements in the marketplace, it's no wonder there's a huge development rush in Silicon Valley. That's why we're excited to host our first Silicon Valley State of the Market event at San Jose Marriott on April 15, starting at 7:30am.
1. Vacancy Is Down
Among our speakers will be Kilroy NorCal SVP Mike Sanford (snapped here with his wife at the Silicon Valley Ball last year), who tells us vacancy has been steadily declining for over four years. Silicon Valley is doing very well right now with a bright growth future, he says, adding that all of Kilroy's projects in the market are 100% leased, including developments for LinkedIn, Synopsys and Audience. So is Chesapeake Commons, a project it purchased last year in Sunnyvale.
2. Hurdles For Building
Mike says one challenge for new development is a tougher government approval process. As such, the market needs to focus either on more density near existing transit stations or adding more transit infrastructure. Last year, economic development office downtown manager Lee Wilcox filled us in on San Jose's new high-rise development incentive approved at the end of 2014. Developers that build downtown's next office skyscraper can save up to $1.5M in fees for a project.
3. Room For Condo Development
Our moderator, Polaris Pacific principal Paul Zeger, tells us the lack of financing has left the area with less than a 1,000 new for-sale condos being delivered in 2014 and 2015. With so many qualified buyers looking for homes to buy at today's low interest rates, he says the upward pressure on pricing is formidable.
4. Rental Market On Fire
In contrast, Paul says Silicon Valley is in the midst of delivering tons of rental housing (almost 10,000 units from 2013 to 2015). He says the willingness of the cities to support development combined with the desire of banks, REITs and major residential developers to take advantage of the massive job growth in the Valley over the last five years has resulted in a substantial wave of new large-scale rental communities. Here's BSB's Centerra, which is almost done in San Jose.
5. Shopping Sprees Are Aplenty
Another speaker will be Essex Property EVP John Eudy, whose firm just scooped up Station Park Green in San Mateo. The company reportedly plans to pull building permits by summer for the fully entitled 599-unit, mixed-use project. Located at 1700 S Delaware, the project will replace a shuttered Kmart site.