Report: Silicon Valley Companies Shifted Focus To North San Jose In Q4

The last quarter of 2015 marked a shift where companies looking for office space moved their attention from the more traditional Silicon Valley cities to one spot in particular: North San Jose.

Bisnow caught up with Joe Brady, corporate managing director for Savills Studley, shown here in his San Jose office. The firm put out a report this week showing leasing and development site sales were hot in Mountain View, Santa Clara and Sunnyvale for the first three quarters of last year. In Q4, however, the busiest activity was in North San Jose, which had six of the top 10 transactions.

Joe tells us Savills Studley's expectation that increased space demands would move south into San Jose proved to be spot-on, making Q4 an extremely active time for what used to be a slow calendar period.

The North San Jose deals that landed in the top 10 were:

• Apple's 402k SF lease at 2503 and 2509 Orchard Pkwy;
• ForeScout Technologies leased nearly 96k SF at 190 W Tasman Dr;
• LETV's 86k SF at 3553 N 1st St;
• General Dynamics' 82k SF at 2688 Orchard Pkwy;
• and Google's 95,667 SF at 75 E Trimble Rd and 78k SF at 2600 N 1st St (shown above).

Joe says the race for space in San Jose is not over as new and existing owners are investing in their properties to attract the next tech tenant. He expects more significant transactions in San Jose this year, cautioning that landlords will need to be smart on pricing—too high and tenants will consider opportunities to the north for the same cost.

North San Jose is well-positioned with the most available space remaining in Silicon Valley (1.9M SF of existing and under-construction space for lease—matching the combined amount available in Santa Clara, Palo Alto, Sunnyvale, Menlo Park and Mountain View) and aggressive incentives from the City of San Jose to attract development, the study finds.

The study also found that, despite Silicon Valley leasing falling from 9.8M SF in 2014 to 7.6M SF in 2015, rents continued to rise and vacancy fall. Regional overall asking rent for Q4 rose 11.5% from last year to $3.57. Overall vacancy fell to 8.3%, down 2.2 percentage points from the year before.