Google's Taking Bite Out of The Market

We just caught up with JLL's Mark Bodie to tell us why Silicon Valley's so juicy (his 2-year-old Gael is more interested in the juiciness of this apple). Vacancy continued to decline 70 bps to 14.1%, according to Q3 JLL stats released this morning. That may seem high, but there are few quality blocks of space remaining, he says. Palo Alto and Mountain View continue to be hot beds of activity. Mountain View's rents escalated dramatically and that is partly due to tenants wanting to have that coveted 650 area code and mailing address—but they pay a premium. 

Mark, reminding all of us Halloween is just 30 days away, is seeing Google buying a lot of what had been for-lease property and taking that in house. That's pushed out tenants into the broader market towards Sunnyvale and Santa Clara where there's a bit more parity between landlord and tenants. He expects dramatic announcements from Google in the next few months on purchase and lease transactions.

Google's growing footprint will impact the face of the Valley and change the dynamics of what is available for lease, he says. In North San Jose, there are plenty of options for tenants looking to grow. While there are large requirements in Santa Clara, it's a relatively affordable option relative to northern submarkets. Net absorption of 488k SF during the quarter brought the total net to 1.8M SF this year. Average asking rates are up 10.3% to $3.38/SF a month, with new product hitting $5/SF.