SAN JOSE, California – Demand for office space in Silicon Valley has skyrocketed over the past three months, driven by large South Bay tech companies expanding their real estate footprint.
Colliers, a commercial real estate company with offices in downtown San Jose, released its Q2 2021 Market Report Thursday, noting that the office rental activity reached 2.8 million square feet from April to June, levels not seen since spring 2018.
The report focused on the South Bay offices of Silicon Valley in San Jose, Mountain View, Sunnyvale, Santa Clara, Fremont, Milpitas and Morgan Hill.
The report found that “the Silicon Valley commercial real estate market rebounded in the second quarter of 2021 with 6.2 million square feet of gross absorption, up 146.9% from the second quarter of 2020 “.
Lena Tutko, research director at Colliers and author of the report, noted that this region is at a “turning point” in the office market.
“Before the pandemic, there weren’t enough office space in the market. Tenants were renting properties that were under construction or not even under construction,” Tutko said. “Now that these properties are online and built, we are finally realizing these gains in the second quarter.”
She said companies like Amazon, Apple, Google and the software and social media giants of Silicon Valley have taken advantage of the fact that more and more people have logged in to get their jobs and shop. Now, these companies have recently made deals to lease more space, pre-lease new office space, and buy and build new office space.
The expanded office footprint comes as more workplaces aim to reformat their layouts to provide more space between their employees.
“To accommodate more people and meet their desire for more space and not to be side by side, there is going to be a need for more space for these businesses,” Tutko said.
Ten percent of South Bay’s tech offices are vacant, and that vacancy rate has increased slightly since the start of the year, according to the Colliers report. The cost of renting office space has also increased, despite the increased availability of real estate.
Like most techs, Roku software engineer Daryl Spitzer has been working from home for almost a year and a half. On Thursday, he said the company announced a hybrid schedule, requiring employees to work in their new San Jose offices at least three days a week, with the option to work from home twice a week.
“If they start having great snacks and catered lunches again, I’ll go for the lunches,” Spitzer said. “But when I want to be productive and work non-stop, I’ll probably work from home because I have a good setup there.”
Tutko expects office work, whether full-time or hybrid, will peak towards the end of the year.
“While Zoom calls are great,” Tutko said, “you can’t replace human-to-human interaction.” while Zoom calls are great, you can’t replace human-to-human interaction. “