Plain Talk

Technology Begins to Drive Commercial Real Estate Expansion in the Silicon Valley

One of California's most technology driven areas has seen a rapid expansion in commercial real estate development between 2012 and 2013. Over the course of a year, investments in the area have seen an increase of 6.2 million square feet. This is enough to accommodate 32,000 workers, and it is thought that the increase in young tech talent in the area is to thank for the expansion. This is certainly backed up by the fact that giants like Google, Facebook, and Apple are leasing out commercial real estate space in the area—before work is even complete. With the Silicon Valley tech expansion , it is possible for industries around the country to follow the lead of big companies, and move in on building projects before they reach completion. This can prove to be an efficient way to find the young professionals needed for commercial success, as well as vital access to flourishing networks.

Big Companies Chasing Pools of Young Talent

Away from Wall Street, Silicon Valley exists as one of the biggest pools of concentrated talent in the U.S. This concentration means that young tech professionals are competing to reach out to companies, rather than the other way around. It is important to recognize how this drives commercial real estate competition, and the recent expansions in the valley itself. According to Colliers International research, around 75 percent of current commercial building activity in Silicon Valley is dedicated to office space. Out of the office space being developed in the area, 39 percent has been leased early by technology giants. This includes LinkedIn, Facebook, Google, and Dell. This is a demonstration of how concentrated areas of talent can lead to strict competition for real estate space, which means small and medium sized companies must pay close attention to ongoing commercial developments in areas where the talent they need is concentrated.

Networking to Secure the Lease You Need

With competition in the commercial real estate industry driving prices up, potential leasers now have to be smart when securing deals. Sometimes networking is as important when securing a lease contract as it is when securing any other business deal. For those who are serious about their purchase or lease, attending an open house and forming connections is a proactive way to get closer to a deal. Something as small as giving a prospective client a gift, or something as complex as producing a strong business portfolio can help you stand out to those who hold the reigns as far as leasing is concerned. This is naturally challenging for smaller companies, as moving into real estate developments in concentrated talent areas is often more expensive — networking is still important though. For those operating a small business, producing a strong financial forecast gives them the confidence to lease to you. Always consider that you are up against larger businesses with great reputations, and work hard at generating the confidence needed for them to lease to you.

Moving Rapidly to Secure Commercial Real Estate Space

Silicone Valley isn't the only area of the U.S. where talent drives development. Manhattan is notoriously competitive, and illustrates perfectly why companies need to move rapidly in order to secure the space they need. The most recent reports on this competition have even suggested that technology start-ups are monopolizing Manhattan office space. Like Silicon Valley, the thirst for Manhattan commercial real estate is driven by the talent that exists there—both in terms of business and technology. When companies look towards areas with concentrated pools of talent to lease or purchase, they need to consider how their costs may rise within the next two to three years. Some data suggests that there has been an increase in rental costs of 100 percent in the last three years in Manhattan. For smaller ventures, this means acting prudently when choosing to lease in an area because of the office's curb appeal. More affordable commercial real estate can be found nearby, often with less access to the greatest pools of talent, but without being left on the edge of technology development entirely. For example, shifting to Downtown Manhattan can currently save a significant amount of money for leasers. However, as more people become aware of this tactic, prices are likely to rise there too. As such, those chasing commercial real estate in talent concentrated need to act fast to find the space they need.