Record Leasing Brings Development Frenzy To Silicon Valley

PALO ALTO, CA-Silicon Valley’s status as the “most dynamic and rapidly tightening US office market” continues as GlobeSt.com receives reports of dramatic leasing activity not seen since the 1990s dot-com era. Due to shrinking vacancies throughout the Silicon Valley, a huge increase in development activity is taking place.

“From 2008 to the middle/end of 2011, there was a complete stoppage of new-development activity for class-A office space, and that was largely a function of lack of construction debt from the lenders’ perspective,” Michael Polentz, co-chair of the real estate and land-use practice at Manatt, Phelps & Phillips here, tells GlobeSt.com. “Nobody was willing to do any spec development unless they had a tenant lined up. But by the end of 2011, leasing activity of existing product started moving at lightning speed. This was due largely to the low vacancy rate, and we had some large tech players that were presumably looking out strategically three to five years, recognizing that there was not a lot of existing product available, so they started gobbling up space.” GlobeSt.com recently reported on a similar phenomenon of space hoarding in the San Francisco office market.