News
Steep Road (Prices)
September 21, 2011
| You’d think the streets of Silicon Valley were lined with gold (though venture capital might be the next best thing). Jones Lang LaSalle recently ranked two streets—Sand Hill Road in Menlo Park and University Avenue in Palo Alto—as North America’s No. 1 and No. 4 most expensive streets for office space. |
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| Yesterday, we chatted with JLL Palo Alto SVP and potential catalog model Hugh Scott (catching up on business after a trip to Croatia). He tells us Sand Hill Road ($114/SF/YR) has long been the bellwether for what folks consider high-priced real estate in the Bay Area. He attributes a space grab mentality to venture capital and private equity firms, seeking proximity to the 280 Freeway. The tenant rep specialist says this coupled with “eternal landlord optimism” has kept upward pressure on pricing. That’s given Sand Hill Road a ring “similar to 90210” and resulted in a sub-3% vacancy. (Does that make Larry Page and Mark Zuckerberg, Brandon and Dylan?) |
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| As for University Avenue ($83/SF) Hugh says Facebook was the catalyst for downtown Palo Alto’s meteoric rise. Other young companies saw the success the social media company was having (and the talent it was able to recruit from San Francisco thanks to Caltrain) and realized this outweighed the higher cost of occupancy. In fact, he’s seeing a migration of some venture capital firms to downtown Palo Alto to be closer to their portfolio companies. From a tenant rep perspective, “it’s becoming far more challenging” to secure the functional and economic flexibility young start-ups need, “given their planned growth trajectories.” |
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| Some tenants are now finding alternatives on California Avenue in downtown Palo Alto as well as in downtown Mountain View, where Hugh’s team put Red Hat into 444 Castro (above). He says the tenant looked at all the outlying markets and this had the best value based on occupancy costs. That’s not a backhanded compliment. Downtown Mountain View is on fire from an activity perspective—it’s also served by Caltrain and offers amenities consistent with downtown Palo Alto. Speaking of backhands, Hugh’s a former pro tennis player who played at Stanford and spent a year and half working as a traveling coach for Venus and Serena Williams. |
