Updated: Sep 14
Silicon Valley's office market landscape is evolving, and not in the direction most would expect. The figures from the second quarter unveil a surprising increase in the vacancy rate, now resting at 19.4%. Meanwhile, the net absorption rate took a sharp downturn, hitting a record low at negative 1.4M SF. Even more striking, there's been a sharp rise in sublease vacancies by 290 basis points from Q1.
By the mid-point of 2023, sublease vacancies in the tech hub of Silicon Valley reached a significant 4.4M SF, as highlighted in the JLL office market analysis. What's behind this shift? The tech industry's giants, like Google, are behind much of this change. There’s been a noticeable move by tech companies subletting massive portions of their office spaces, with Google's recent move from its Mountain View and Sunnyvale offices being particularly notable.
Google isn’t slowing down in streamlining its substantial Silicon Valley presence either. Just this week, the tech behemoth has listed over 182K SF for sublease in a Palo Alto campus that has been part of its real estate portfolio for close to ten years. This campus at the Foothill Research Center, encompassing addresses like 4001, 4005, 4009, and 4015 Miranda Avenue, is now on CoStar’s listing, presented by Newmark.
Adding to this downsizing spree, in May, Google made headlines by listing a massive 1.4M SF for subleasing, primarily located in the Moffett Park campus in Sunnyvale, a property under Jay Paul Co.'s ownership.
Several properties in Sunnyvale and Mountain View are now up for grabs. These include buildings on Enterprise Way, a 27K SF space at 1215 Bordeaux Drive, and several buildings on Clyde Avenue and National Avenue. Notably, many of these properties are available for extended leases, some going up until 2031.
Additionally, in a move that took many by surprise, Google recently put the brakes on their ambitious 80-acre Urban Village project in downtown San Jose. This $19B initiative, titled "Downtown West", had plans that included housing, office spaces, retail spaces, and even public parks. The project was primed to be a hub for about 25,000 Google employees, all centered around the future Diridon Station.
A New Perspective from the Occupier's Standpoint
The broader adoption of remote work is becoming more ingrained in long-term corporate strategies. With numerous firms granting employees the flexibility to work from home either partially or even permanently, this translates to a decrease in the need for physical office spaces. On average, this work-from-home wave is anticipated to minimize office space requirements by at least 20%. This shift could further increase vacancy rates in the upcoming months, particularly with tech giants like Google leading the downsizing trend.
Working with a Property Tax Appeal Firm: Your Key to Savings
In light of these changing dynamics in the Silicon Valley office market, property owners might be overpaying their property taxes. It's prime time to collaborate with a property tax appeal firm to ensure you're not burdened with excessive costs given the market's downturn. With tech giants releasing significant spaces back into the market, property valuations are bound to shift, and so should your property tax assessments.
Stay informed and proactive. Seek expert guidance to ensure you're only paying what's fair.