The Tech Sector is Driving Real Estate Activity in Silicon Valley

By Jennifer Popovec

As reported in Retail Traffic Aug 4, 2011

For most of the U.S., the Great Recession was the worst economic stretch since the Great Depression. But for Silicon Valley, it paled in comparison to the wreckage the area experienced after the dot.com bust.

…So it is with some trepidation that industry observers approach the latest round of technology mania gripping the region.
Tech firms are certainly growing again — and jaw-dropping IPOs have returned. This time, we're told, Silicon Valley start-ups like LinkedIn, Facebook and Twitter learned the lessons of the early 2000s bust and will show real profits.

…As it stands, many economists believe the Bay Area (San Francisco, Oakland/East Bay and Silicon Valley) is on track to become one of the strongest regional economies in the nation, rivaling Washington D.C. and Texas.

…Nevertheless, companies seem to be leasing new office space today, despite not necessarily having the bodies to fill those spaces.

…That trend is also playing out in the retail sector where merchants are on the hunt for space despite the fact that job growth has yet to occur in any substantial way.

…Most of the big-box space in the Bay Area that was vacated during the recession has been backfilled, and national retailers have such an appetite to expand in the region that developers are planning projects and moving dirt, according to John Cumbelich, president of John Cumbelich & Associates, an X Team partner based in Walnut Creek, Calif.

"For more than two years, retailers that wanted to expand were able to secure locations, and now that they have gone through the recession-created vacancies, that demand is being channeled into new development," Cumbelich says. "We're at a point where our big retail clients absolutely have a desire to increase their presence, and we've clearly recovered enough to where the development cycle is ramping up again."

Cumbelich says most new development projects are under construction or planned in the South Bay and Silicon Valley, where there is a heavy concentration of tech-related companies. In San Jose, for example, Hunter Storm LLC is developing @First, a mixed-use project with office, retail and hotel uses. Scheduled for completion later this year, the retail portion is
by Target.

To read this article in full, please click here.