Commercial real estate buzzing in Silicon Valley

Office space is at a premium in Silicon Valley.

The steady growth of tech companies in Silicon Valley has helped fuel a commercial real estate surge in Santa Clara and south San Mateo counties.

Developers have amped up the construction process with approximately 6 million-square-feet of office space being built or renovated, which is double the activity compared to last year.

"We are starting to see some very tight office markets in Santa Clara County," Andy Poppink, managing director for the Silicon Valley office of commercial realty brokerage Jones Lang LaSalle, told The San Jose Mercury News.

More than 33 percent of the office and research space has already been acquired by tech firms looking to expand. Jones Lang LaSalle estimated that 6.2 million-square-feet of office space is under construction in Santa Clara County and Menlo Park. That figure is enough to house roughly 31,000 employees.

"It's mainly access to talent," said Tim Bajarin, an analyst with Creative Strategies. "Silicon Valley has the richest pool of young tech talent in the world."

Nearly 5 million-square-feet of the building construction is designed for new office space, while the rest entails renovations for existing buildings.

"Social networking, Internet and cloud technology companies are the primary drivers of the growth," said Phil Mahoney, an executive vice president with realty firm Cornish & Carey.

According to Jones Lang LaSalle, 39 percent of the 5.7 million-square-feet has been leased prior to the completion of the project. Mahoney said such tech giants as Google, Apple, LinkedIn, Amazon, Facebook, Samsung and Dell are rooting around for office space.

"We see a lot of optimism about growth on the part of the biggest tech companies and a lot of smaller ones," said Chad Leiker, a vice president with Kidder Mathews, a realty firm.

Startups and revamps
New construction starts are the focal point of the commercial real estate boom, but many developers are spending millions of dollars to restore existing buildings.

"Developers who don't renovate their older buildings will be left standing on the curb," Jim Beeger, a Colliers senior vice president, said to The San Jose Mercury News.

In Sunnyvale, Calif., developers knocked down several buildings to make room for a state-of-the-art LinkedIn campus. The LinkedIn building will be big enough for 2,600 employees thanks to its 587,000-square-feet site.

"We want to create a unique environment that most employers in Silicon Valley want," said Bixby Land President William Halford. Bixby Land is giving existing buildings a slick interior and exterior makeover to create campuses for large tech companies.

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