Silicon Valley South of Sunnyvale Still Waiting for Recovery
Submitted February 12, 2012, 10:24 PM
Is southern Silicon Valley being permanently displaced in the technology constellation of star locations? The debate is on.
The rent differential between Silicon Valley’s hottest markets and its coldest is the steepest in his experience, John Michael Sobrato of The Sobrato Organization told a South Bay industry gathering Feb. 9.
The chief executive of Cupertino’s Sobrato Organization, which owns 7.5 million square feet of commercial property, mostly in Silicon Valley, is sounding a theme heard more and more in commercial property circles. In the past, some tenants preferred Santa Clara to Sunnyvale, but in this cycle, “south of Sunnyvale has been dead,” he said.
While the distance between Mountain View and Milpitas, at either end of state Highway 237 on the southern rim of the bay, is only 12 miles, the difference in workplace rental rates on the bay’s east and west sides is in some cases a chasm. Motorola Mobility agreed last year to pay $3.37 a month to be in Sunnyvale on the west side of the bay. Thin-film solar-panel maker NovaSolar got rates of 65 cents in Fremont, on the east side, according to Cassidy Turley Real Estate Services. Sunnyvale is immediately south of Mountain View and Fremont just north of Milpitas. Sunnyvale and Fremont are 19 miles apart.
“The west side has really dominated,” Erik Hallgrimson, a partner with Cassidy Turley in San Jose, told a January gathering in San Francisco during the company’s annul market review and year-ahead forecast. Hallgrimson specializes in research and development space and appeared on a brokers panel. He argued that the dividing line between what constitutes office and R&D space is less distinct than ever.
On Jan. 31, the San Jose City Council unanimously voted to cut traffic-impact fees to spur development interest in North San Jose, the city’s largest and most important industrial concentration. Cisco Systems Inc., a cornerstone of the region, maintains its headquarters campus in the neighborhood, but Cisco is not expanding there. “Approximately 2.4 million square feet of new R&D/office space is either under construction or in the planning and entitlement phases in Santa Clara and Sunnyvale at this time. We have next to nothing happening in San Jose,” reads a memorandum from Mayor Chuck Reed and four council members supporting the changes.
Besides the fee cuts, the council beefed up development services staffing, adding 21 positions in the planning, building and code enforcement, public works and fire departments. The council directed city administrators to return in April with measures for greater development flexibility in height and density for North San Jose.
“I think the center of the tech business is moving north,” Luis Belmonte, principal of San Francisco’s Seven Hills Properties, told the Society of Industrial and Office Realtors’ Northern California Chapter last week. Belmonte moderated the panel where Sobrato spoke. The discussion took place at San Jose’s Hotel Valencia in Santana Row. “There are a whole lot of buildings in Santa Clara County that are no longer appropriate for the tenants. If Silicon Valley wants to stay relevant, it has a lot more to do to improve the quality of life and the facilities,” Belmonte said.
