Angela Swartz/Daily Journal
There was about 10.8 percent office vacancy in San Mateo during the fourth quarter of 2013.
More office spaces are being filled and built along the Peninsula while rents are ticking up, which experts say is a sign the economy has bounced back.
On the Peninsula, average asking rents ended the year at $45.56 per square foot a year, up 8 percent from last year, according to a fourth quarter 2013 report by Jones Lang LaSalle, a company that provides commercial real estate services for tenants, corporations and investors. Some tenants in Silicon Valley looking for 100,000 square feet are rumored to have expanded their search criteria to include the mid-Peninsula, the report stated. More investors are beginning to warm up to the mid-Peninsula. The market has seen a significant uptick in sales activity, likely triggered by the growing number of tenant migrations to the area, the Jones Lang LaSalle report stated. Overall, the average asking rate for San Mateo County is $41.88 per square foot a year, according to a fourth quarter 2013 report from Colliers International.
Mike Cobb, senior vice president of Colliers International’s Peninsula office, said the overreaching trend for the last year is vacancies are continuing to decline. In the Colliers International report, San Mateo County’s vacancy rate decreased to 11.4 percent from 12.7 percent, this the lowest vacancy rate since fourth quarter 2007 when it was 11.33 percent. “Clearly, it’s a sign of current job growth or anticipated job growth,” he said. “It’s tough to say [if the trend will continue]. There was such impressive demand in the last year and it’s not unrealistic to see this activity continue going forward.”
Rents have somewhat stabilized and continue to track up in desirable markets, he said. Class A spaces, buildings that represent the highest quality buildings in their market and are well-located, are in high demand, Cobb added. Gross absorption, the measure of all leasing activity within the market, for fourth quarter 2013 was 1,047,475 square feet, bringing the 2013 total to 3,453,167 square feet, according to Colliers.Businesses are moving into the area.
Opera Software signed an expansion deal for an additional 17,702 square feet of space at 1875 S. Grant St. in San Mateo. Opera and its subsidiaries now employ 200 employees in Silicon Valley — double from the same time last year, according to Norwegian-based Web browser company. This number is expected to reach 300 in 2014.
“Silicon Valley has become one of Opera’s most strategic locations to do business with technology industry juggernauts to help make the Internet open to everyone and grow our talent base,” said Mahi de Silva, CEO, Opera Mediaworks, in a statement. “We realize the importance and influence Silicon Valley has on how we power the global mobile ecosystem, including how we help consumers to discover content, advertisers to reach the audience they are looking for, publishers to generate revenue and operators to provide a faster and better network experience. We will continue our expansion in this region by hiring people in all areas and continue to grow Opera Software.”
The mid-Peninsula has seen increased activity in the last couple of years because of its place between Silicon Valley and San Francisco, said Julia Georgules, research manager for Jones Lang LaSalle. Additionally, having technology companies such as Facebook in the area has been a huge driver for those wanting to be near talent and new technology, she said.
“In 2014, the whole region is still going to be very strong,” she said. “There was a question whether there would be a burst of the tech bubble but, at this point, it’s a very strong industry and there doesn’t appear to be any signs of that faltering.”
There are some areas along the Peninsula that continue to have a harder time leasing and selling office space. For example, Brisbane and San Carlos have more vacancies than other areas, but are notorious for this, said Dave Dove, associate vice president at Cassidy Turley Commercial Real Estate Services. Brisbane had a 52.1 percent vacancy rate during fourth quarter 2013, but Georgules said it’s slightly misleading this is a bad trend since there is a lot less inventory in Brisbane.Other trends along the Peninsula provided by Jones Lang LaSalle state tenants are aggressively competing for all sizable blocks of space in Palo Alto and Mountain View and touring activity for space larger than 30,000 square feet in the mid-Peninsula has picked up.
Meanwhile, Edmodo, an edtech company, is relocating from downtown San Mateo to expand into 48,370 square feet at 1200 Park Place in the same area. The law firm Weil Gotschal is in the market for 70,000 square feet of Class A space along State Route 92, according to the Jones Lang LaSalle report. Additionally, Google leased 94,400 square feet of office space at 1000 Cherry Ave. in San Bruno, according to the Colliers report. CardioDX leased a 69,449-square-foot space at 500-600 Saginaw Drive in Redwood City. It is relocating out of Palo Alto to a bigger office during the first half of 2014, according to the Jones Lang LaSalle report.
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