PALO ALTO, CA-Silicon Valley’s status as the "most dynamic andrapidly tightening US office market" continues asGlobeSt.com receives reports of dramatic leasing activity not seensince the 1990s dot-com era. Due to shrinking vacancies throughoutthe Silicon Valley, a huge increase in development activity istaking place.

“From 2008 to the middle/end of 2011, there was a completestoppage of new-development activity for class-A office space, andthat was largely a function of lack of construction debt from thelenders’ perspective,” Michael Polentz, co-chairof the real estate and land-use practice at Manatt, Phelps& Phillips here, tells GlobeSt.com. “Nobody waswilling to do any spec development unless they had a tenant linedup. But by the end of 2011, leasing activity of existing productstarted moving at lightning speed. This was due largely to the lowvacancy rate, and we had some large tech players that werepresumably 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 ofspace hoarding in the San Francisco office market.

In 2011, the absorption rate of existing office product inSilicon Valley was approximately 2.7 million square feet, an amountthat has not been absorbed here since the dot-com era of the 1990s,Polentz continues. Silicon Valley currently has about 10 millionsquare feet of existing office product in the pipeline, and roughlyone million square feet of that will start or complete constructionin 2012, “so there really is a movement to capture some of theenergy and the fast-paced environment of what’s being taken downfrom larger tech players in the Silicon Valley,” Polentz adds.