Demand for office space is bringing mega-deals to the South Bay
February 23, 2022 | Erik Hayden | Urban Catalyst
One year ago, CBRE released a report concluding that “San Jose offers the most favorable market for office construction in the U.S.”
What a year it’s been since that report was issued. In San Jose, AGC Equity Partners paid $780 million for three buildings in north San Jose. Meanwhile, Microsoft and Apple have taken large land holdings, and Google got the city’s OK to move forward with a mega-campus on the western edge of downtown San Jose.
“San Jose represents the urban heart of Silicon Valley. It combines one of the nation’s deepest talent pools with a spacious environment, desirable climate and a community of cultural and retail offerings. Companies appreciate that a San Jose location is accessible to a wide swath of top-tier talent, and affords room for growth.” – Mark Schmidt, senior managing director of CBRE’s Silicon Valley office.
Mark is preaching to the choir. Urban Catalyst is one of several developers building new office space to help meet the demand of tech companies moving to or expanding in San Jose. That demand is impacting much of the South Bay.
In a December, Mercury News article titled, “LinkedIn buys and leases chunks of Sunnyvale space amid tech expansion,” listed notable leases and acquisitions, noting that the deals “defy gloomy prognostications of a Silicon Valley tech exodus.”
Major deals listed include:
• LinkedIn paying $122.8 million for two research and office buildings in Sunnyvale and leased a Sunnyvale office building. In July, the company bought the site it had been leasing for its Sunnyvale headquarters, paying $323 million.
• Meta Platforms leasing 719,000 square feet in a four-building campus in northern Sunnyvale. The company also leased 520,000 square feet in Burlingame.
• Apple leasing 698,000 square feet at Sunnyvale’s Pathline Park while moving forward with a new campus in north San Jose. The iPhone maker paid $450 million for five Cupertino office buildings.
• Despite the company moving its headquarters to Texas, Tesla rented a Palo Alto office building in Palo Alto. Tesla still has its vehicle factory in Fremont.
• Google got all the necessary approvals for its huge downtown campus and has additional plans in the works for north San Jose, Mountain View and Sunnyvale.
• Adobe is erecting a new office tower at its headquarters in downtown San Jose.
• Intuitive Surgical is planning to build a huge two-building office and research center in Sunnyvale that totals over 1 million square feet.
Many of these deals involve existing buildings. But space in existing buildings is finite. More office space will be needed as these companies continue to grow.
I’m reminded of that classic line from “Field of Dreams”–”If you build it, they will come.” Here in the South Bay, we’re building it.
About Urban Catalyst
Urban Catalyst Opportunity Fund LLC (“Urban Catalyst”) is a real estate development Fund focused on properties located in the downtown San Jose Opportunity Zone, in the heart of Silicon Valley.
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