Four Ways Silicon Valley is Dominating NYC
Some of NYC's priciest office space is in the Plaza District, but Downtown Palo Alto's got it beat—by a dollar. (A dollar is all you need for the win, just watch The Price is Right.) Office space there is averaging $86/SF, topping the Plaza's $85/SF. We asked JLL managing director Rich Branning other ways that Silicon Valley is toppling the competition.
1) What's Not to Love?
Rich, putting up a shot during a Final Four game in 1978, was in the Valley through the dot-com boom and knows what it looks like when it's reaching the point of diminishing return; we aren't close to that, he says. There's impressive job growth and companies boasting strong balance sheets. VC infusion has helped fuel 14 straight quarters of positive net absorption. Another indicator things are great? When you start to see rents rise and vacancy rates go down in Milpitas and Fremont. Those markets tend to be the first to tank during the recession and the last to come out, he says.
2) A Different Corporate Tenant
In the Valley, tenants aren't "bubble-ish" in nature, Rich says, nor do they have a "pie in the sky" mentality. Interest has moved south of Palo Alto, through Sunnyvale and Santa Clara, above. He thinks tenants are making smart biz decisions when it comes to hiring and space needs. Fewer large blocks present problems for growing companies, and that opens opportunities for developers to put new product on the shelf.
3) It Ranks No. 3 in Tech Love
JLL just ranked the top 34 high-tech markets, based on appeal to companies and residents—known as market dynamism. Movement in rankings this year had a lot to do with amenities and features of each. Silicon Valley rolled in at No. 3 for its access to talent, VC funding, and an established tech presence. Seattle pushed the Valley down one spot this year, coming in at No. 2 thanks to more accessible urban elements. Above, some highlights from the report on the 34 markets overall.
4) Its All About the Bottom Line
While S.F. ranks No. 1 in the report, he's seeing symptoms in the city that look a little "dot com-ish." Generally speaking, activity in the market is driven by top-line growth from revenue, sales, and market share—not profits. The Valley, however, has a larger portion of companies that are bottom-line driven. He's seeing companies want to squeeze a penny and negotiate, thinking long term. He has two or three assignments in the Valley that say they can't continue to scale while paying for both high salaries and real estate. They want to look domestically, then if need be, look internationally to grow.