Silicon Valley Office Market on Road to Recovery Says Second Quarter Studley Report
Palo Alto, CA (July 26, 2010)  

Silicon Valley’s economy, including the office/R&D market, showed clear signs of improvement during the second quarter of the year. The region recovered 2,695 jobs—a 9.5 percent recovery rate and more than two full percentage points above the national average of 7.3 percent. 

“The market appears to be recovering faster than it did post the dotcom debacle, partially due to the fact the businesses today offer more sustainable products and services than many of the companies of the early 2000’s,” said George Fox, Studley senior vice president and branch manager of the firm’s Silicon Valley office. “Furthermore, professional/business services were responsible for about two-thirds of the jobs recovered, which bodes well for future office leasing activity.”

Availability rate declines
The overall rate for vacant available space, 18.6 percent, decreased for the quarter by 0.5 percentage points and for the year by 1.4 percentage points, according to the Silicon Valley Studley Report, Studley’s analysis of office market conditions in 12 Valley submarkets. The Valley’s year-over-year decrease in availability is by far the steepest decline among the nation’s markets, with New York (-0.5 percentage points) and San Diego (-0.5 percentage points) tied for a distant second.  

Leasing activity stable
Four-quarter trailing leasing activity (the sum of all leasing activity over the last four quarters) totaled 5.6 million square feet, stable for the quarter, and up by 33.3 percent as compared to one year ago. “Perhaps even more significant is that for the second successive quarter, three leases in excess of 100,000 square feet were completed,” noted Fox. “These included Atheros’ lease of the 185,000-square-foot 1700 Technology Drive; Apple’s 160,000-square-foot-lease at 20300 Stevens Creel Boulevard; and Citrix’s 140,000-square-foot transaction at 4988 Great America Parkway.”  

The complete list of top transactions for the quarter included:    

Tenant Sq Feet Address  Market Area
 Atheros Communications 185,338  1700 Technology Drive  San Jose
 Apple 160,000  20300 Stevens Creek Blvd  Cupertino
 Citrix 140,965  4988 Great America Parkway  Santa Clara
 InnoPath Software  65,000  1195 W. Fremont Avenue  Sunnyvale/Cupertino
 Global Foundaries  62,874  840 N. McCarthy Boulevard  Milpitas
 VMWare  59,125  3305 Hillview Avenue  Palo Alto
 Palantir  53,480  100 Hamilton Avenue  Palo Alto
 SETI Institute  44,352  189 N. Bernardo Avenue  Mountain View/Los Altos 
 Perkins Coie  36,000  3150 Porter Drive  Palo Alto
 Kakai  30,400  5155 Old Ironsides Drive  Santa Clara 
 Sidley Austin  26,028   1001 Page Mill Road  Palo Alto
 PSI Systems  21,722  385-399 Sherman Avenue  Palo Alto 
 Overland  20,777  125 S. Market Street  San Jose
 Jive Software  18,770   325 Lytton Avenue   Palo Alto 
 Satellite Healthcare  16,366  300 Santana Row  San Jose

Rental Rates Mixed 
At the close of the second quarter, overall asking rent stood at $2.28 per square foot per month, up by 2.4 percent for the quarter but down by 11 percent for the year. The Class A rent, $2.56, registered quarterly and yearly declines of 1.1 percent and 7.6 percent respectively.

Market outlook 
Although the Valley’s economy has improved and the availability of large blocks of quality space Downtown has tightened slightly, there’s still substantial vacancy across many of the region’s submarkets. “In the CBD-San Jose submarket, small to mid-size firms able to commit to long-term transactions will still find a relatively deep pool of available space and generous concession packages,” said Fox.

About Studley. Studley is the only global tenant advisory firm with a pure tenant representation delivery platform. Founded in 1954, Studley pioneered this conflict-free business model. Today, with 19 offices nationwide and an international presence through its London office and AOS Studley throughout Europe, Studley provides strategic real estate consulting services to top-tier corporations, law firms, nonprofits, government agencies and institutions of higher education. Information about Studley is available at