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Spec Is King In the Valley

San Jose Office

Federal Realty just announced its 225k SF office project on Lot 11 at Santana Row will go spec, starting construction this fall. Its same-sized neighboring Lot 9 site, under the entitlements process now, is also expected to start digging without a signed tenant. (Just as men and women are waiting longer to get married, buildings are taking their time before finding a mate.) Spear Street Capital is underway on a 225k SF building in north Santa Clara; Irvine is underway on a massive campus—Santa Clara Square.

Cornish & Carey EVP Phil Mahoney is marketing up a storm for Jay Paul, whose 2M SF Moffett Place project has three of its six buildings under construction. He's also leasing 1M SF for Ellis Partners in San Jose and another two 500k SF sites for Legacy in San Jose. Smaller sites are also getting started without a tenant in mind. The long-cited “flight to quality” continues to ring true; the top 12 leases this past year were in Class-A space.

In the last year, 2.5M SF of new supply has been delivered, and 65.3% of that has already been leased, according to Cushman & Wakefield. Average asking rates maintained upward trajectory through Q2, with the market-wide average asking rate of $2.84/SF a month, a 2.5% increase from Q1 and 11.8% higher than this time last year.