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After 20-Year Hiatus, South Bay City Slated For New Multi-Building Tech Park

More industrial product is headed for the South Bay to potentially ease the low vacancy rates that hit Silicon Valley last year due to the rise in e-commerce and industrial space use by biotech companies. A joint venture between Trammell Crow and CBRE Global Investors broke ground this month on the Butterfield 5 Technology Park in Morgan Hill, about 20 minutes from downtown San Jose, according to a press release.

The project, which is the first multi-building industrial park to emerge in Morgan Hill in the past 20 years, is part of a broader 58-acre master-planned development initiative that will include a 389-unit multifamily project and a 3-acre park. The industrial park project involves constructing five Class-A buildings totaling 410K SF on a 24-acre site acquired by the joint venture in August 2020. The site is situated west of Highway 101 at Butterfield and Sutter boulevards with nearby access to Monterey Road. 

Rendering of Butterfield 5 Technology Park in Morgan Hill.

“The Butterfield 5 project is a major investment in Morgan Hill and incorporates leading design features within a modern technology park. We are excited to move this development forward, as the project addresses a unique segment of the market with its small and medium-sized buildings. We believe Butterfield 5 will meet market demand by providing attractive options for local companies seeking Class-A light industrial space,” Trammell Crow Northern California Business Unit Principal Will Parker said.

No pre-leasing has yet taken place for the industrial park that features buildings ranging from 70K SF to 92K SF, geared for light industrial or advanced manufacturing/R&D users needing as little as 35K SF. Design features include clear heights between 28 and 32 feet, contemporary architecture with prominent glass entryways and extensive landscaping, according to the release. CBRE’s Rob Shannon, Chip Sutherland and Brian Matteoni are listed as leasing representatives for the project. Construction is expected to be complete in Q1 2022.

“Morgan Hill is now a part of the conversation for Silicon Valley tenants and positioned to compete for upcoming lease rollovers in the next 36 months,” Parker said.

Industrial space was the only Silicon Valley product type that experienced positive net absorption in Q4 2020, according to a report from Colliers International, with quarterly net absorption at 475K SF. The report partly attributed the numbers to three deals that made up 38% of the quarterly absorption. The first is a 179K SF lease in Fremont by molecular diagnostics company Cepheid at 44509 Pacific Commons Blvd. Another major Fremont lease took place last quarter by biopharmaceutical company National Resilience, which signed a 153K SF lease at 800 Corporate Way. Finally, Amazon picked up 141K SF at 2256 Junction in San Jose.

Overall Q4 industrial vacancy for Silicon Valley was 3%, with the city of Gilroy coming in at 0.7%. Fremont's vacancy rate was 6.1%, Morgan Hill at 7.9% and San Jose came in at 4.4%. Most of the vacancy came from new construction, mainly 82K SF at 86 Montecito Vista Drive and 30K SF at 470 Needles Drive in San Jose, and 30K SF at 745 Jarvis Drive in Morgan Hill.