San Jose and San Francisco are among the top-10 jobs-producing metropolitan areas in the country today based on their employment growth rates over the last 12 months, the brokerage finds. Together with the Oakland metropolitan area, the region is growing on the order of 100,000 jobs a year and should maintain that pace for the next several years, Hessam Nadji, Marcus’ managing director of Research and Advisory Services, said.
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As much effort as has been expended to explain the San Francisco workplace revolution, Silicon Valley workspace is in a jumble, too.
Five of the valley’s most important companies have announced large, expensive new campuses. On their face, the decisions—by Apple, Google, Facebook, Nvidia and Samsung—make two statements: Companies don’t expect to abandon Silicon Valley, but the existing workstock does not meet corporate needs.
Silicon Valley with its historic startup and hardware-engineering business culture has specialized in the vanilla office and workplace building. For landlords, the better to usher in the next company when the last one outgrows your space, gets bought or quietly fails. And venture capitalists aren’t interested in financing fancy.
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The San Francisco office market is still the hottest in the country and one of the hottest around the world. The thriving technology sector continues to power the local real estate economy. The economies of agglomeration that have driven technology growth in Silicon Valley over the past 30 years have expanded into San Francisco.
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An 11.6-acre site on the east side of San Jose’s popping Santana Row shopping center is being brought to market for the first time in more than 40 years.
The Winchester family, which also owns the Winchester Mystery House next door, is offering the site unpriced as a redevelopment opportunity under a 50-year ground lease. Three of the signature, mushroom-capped movie houses owned and operated by Century Theatres throughout Silicon Valley and a sea of surface parking currently occupy the site. The property is zoned for immediate development of 500,000 square feet of offices and retail space but could accommodate more than a million square feet for the right user.
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New York City-based Deutsche Asset & Wealth Management, formerly known as RREEF Real Estate, expects to achieve an initial yield of 6 percent on the 431,490 square-foot Oakmead West buildings in Sunnyvale that it has acquired from Equity Office.
Deutsche
Asset paid $275.7 a square foot in an all-cash transaction, according to industry sources with first-person knowledge of the exchange.
The acquisition is one of three that the real estate manager has made on behalf of three institutional investors for $266 million total. The other two properties are an 89,074-square-foot Calabasas, Calif., neighborhood shopping center, The Courtyard at the Commons, and a 319,844-square-foot Seattle office property at 605-625 Union Station.
Todd Hen
“As we continue to leverage our strong industry relationships and expertise in the local markets in which we operate, we are very pleased to add these high-quality assets to our clients’ portfolios,” he said.derson, head of real estate Americas for Deutsche Asset & Wealth, said the three properties share similar qualities, including “a dynamic location within a core market, currently with stable tenancy that should provide consistent income, and low in-place rents relative to market, which we expect to provide appreciation over time.”
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The office vacancy rate fell only slightly during the first quarter, as a lack of significant job growth continued to impede demand for space, according to a quarterly report released on Tuesday.
At the same time, U.S. office construction during the first quarter reached a 14-year low as developers remain spooked by soft demand and meager rent growth, according to real estate research firm Reis Inc.
Persistent lackluster U.S. job growth was behind the 0.1 percentage point U.S. office vacancy rate decline. Demand for office space hinges on hiring workers to fill it. Although hiring in February reached 236,000, that level has not yet been consistent enough to convince employers to commit to leasing more space. In areas where the growing technology and energy industries are dominant employers, rents are increasing much faster than the national average.
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San Jose’s City Council has approved a trio of agreements with Samsung Semiconductor Inc. to build a 680,000-square-foot research and development campus and new North American headquarters in North San Jose.
The project is expected to involve a capital investment of no less than $200 million, assuming an estimated per square foot construction cost of about $300 and excluding the value of business equipment required to outfit the facility.
The campus, which is proposed to include two, 10-story towers, is expected to house 2,000 workers. Samsung has an existing 300,000-square-foot complex at the site, 3655 N. First St., where 370 people already work.
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It’s one of those winter days in the Bay Area where winds and a downpour are going to make that sprint from the parking lot to your office building a wet mess. If only the adjacent parking garage had any spaces. Lucky for you, you’re on speaking terms with the building. Yes, the building. It tells you that there are two spaces unfilled and one of them is near the fourth-level elevator. That “conversation” is not science fiction. And that isn’t all that a “smart” building might tell its tenants and owners.
“There are a couple of trends we see in the industry,” said David Marks (pictured), chief executive officer of Teecom, an Oakland-based technology systems research, strategy, design and engineering firm that has worked on real estate projects from hospitals to corporate headquarters.
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Prologis, Inc. (NYSE: PLD), the leading global owner, operator and developer of industrial real estate, recently published an in-depth analysis of the United States industrial real estate market in a paper titled “The Shape of the U.S. Industrial Recovery.”
In the report, the company’s research team points to a strengthening of the industrial market with the recovery transitioning into expansion. They believe this is driven by three key factors:
– Effective rents expected to rise 25% over next four years;
– Pent up demand: Exhibited by strong net absorption in the fourth quarter and high readings from Prologis’ proprietary Industrial Business Index survey of customer activity levels; and
– Broadening leasing velocity: Market tightness is supporting rent growth in more asset types, in more markets and in more locations in those markets
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Office vacancy rates declined or held steady in most major U.S. markets during Q1 2013, according to preliminary data from CBRE Group, Inc. Six of the 12 largest markets showed declines in office vacancy, led by Denver and San Francisco, while two markets remained stable. Industrial availability continued to decrease moderately in major U.S. markets as well.
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