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Stats on the Go

OverviewSilicon Valley’s industrial market performed well during the second

quarter. Driven by high tech and manufacturing companies, total

employment grew by 1.9% year-over-year through June 2011,

according to Moody’s Analytics. Electronic manufacturing

companies were especially robust in their first quarter hiring,

contributing to overall manufacturing employment rising 3.2% and

tech employment increasing a strong 4.7% during this time. As of 

May 2011, the unemployment rate for the San Jose metropolitan area

stood at 9.7%, well below the state average of 11.4%.

Market ActivitySilicon Valley’s industrial market tightened further in the second

quarter with the vacancy rate declining to 11.9% from 13.0% at year-

end 2010. The demand for tech space drove the high tech overall

vacancy rate down to 14.9% from 16.4% at year-end 2010.

Cupertino is one of the hottest submarkets in the Valley as the

vacancy rate stood at a mere 1.0% in the second quarter, down from

5.4% at year-end 2010. Newark’s high tech market posted increased

activity with the vacancy rate falling to 31.2% from 44.7% on the

heels of Logitech International committing to nearly 265,000 square

feet (sf). Mountain View remains as one of the most active markets

due in large part to numerous deals by tech giant Google, as well as aroughly 114,583 sf lease by Siemens USA.

Year to date, nearly 7.0 million square feet (msf) of industrial space

has been leased. Of this, more than 3.6 msf was leased in the second

quarter resulting in quarterly leasing activity rising 9.5% from the

first quarter. Compared to the San Francisco Peninsula, renewal

activity accounted for a larger share of leasing activity in Silicon

Valley, accounting for 33.8% of the volume versus 18.4% in the

Peninsula. Improving market conditions resulted in the average direct

asking rent rising 3.3% to $0.93 per square foot per year (psf) during

the first half of 2011. Market conditions also improved in the

warehouse/distribution segment of the market with the vacancy rate

dropping to 7.2% in the second quarter from 8.1% at year-end 2010.

Investment ActivitySales volume totaled nearly 2.0 msf in investor activity and another 

1.1 msf in user-sale volume. Flushed with cash, institutional and high

net worth investors acquired well-priced portfolios in the Valley in an

effort to take advantage of pricing opportunities. Localinvestor/developer, Peter Pau acquired a nine building portfolio in Los

Gatos for nearly $132 psf. Capmark Financial purchased an eight

  building portfolio in Sunnyvale and San Jose for $128 psf. LBA

Realty acquired a nine building portfolio from Sobrato Development

for approximately $112 psf. Google was the most active user buyer,

  purchasing nearly 260,000 sf in nine buildings in Mountain View.

Medical supply companies were also active, including Intuitive

Surgical, Purity Cosmetics and St. Jude Medical.

Outlook Total job growth is forecast to gain traction through the next two

years, growing by 1.8% in 2011 followed by an increase of 2.1% in

2012. New job creation is expected to lead to increased leasing

activity, pushing the vacancy rate down during this period. Two

speculative data centers totaling 280,000 sf in Santa Clara are the only

 projects currently under construction in the market area with delivery

slated for the third quarter of 2011. Given these positive forecasts,

demand is anticipated to outpace supply, yielding tightening market

conditions and positive rent growth.

Leasing Activity vs.

Overall Absorption

Overall

Rental vs. Vacancy Rates

SILICON VALLEY

2Q11

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

2007 2008 2009 2010 2Q11

  m  s   f

Leas ing Activi ty Overa ll Absorption

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

2007 2008 2009 2010 2Q1

  p  s   f   /  y  r

Rental Rate Vacancy Rate 2Q10 2Q11 Y-O-Y

Change12 monthForecast

OverallVacancy

13.7% 11.9% -1.8 pp

Direct AskingRents (psf/mo) 

$0.93 $0.93 0.0%

YTD LeasingActivity (sf)

4,716,446 6,953,140 47.4

 

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* The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of theinformation contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listingconditions imposed by our principals.  © 2011 Cushman & Wakefield, Inc. All rights reserved.

Cushman & Wakefield of California, Inc.  – Lic. #00616335

560 S. Winchester Boulevard, San Jose, CA 95125 (408-436-5500) www.cushmanwakefield.com 

Market/Submarket Statistics

Market Hi hli hts

SILICON VALLEYINDUSTRIAL REPORT

2Q11

SIGNIFICANT 2Q11 LEASE TRANSACTIONS

BUILDING MARKET TENANT SQUARE FEET PROPERTY TYP

7600-7700 Gateway Boulevard Newark Logitech International 263,453 High Technolog

464-468 Ellis Street Mountain View Google, Inc. 195,553 High Technolog

675-685 East Middlefied Road Mountain View Siemens USA 114,583 High Technolog

355 East Trimbel Road San Jose Qualcomm, Inc. 96,780 High Technolog

411 East Plumeria Drive San Jose NXP Semiconductors 86,602 High Technolog

SIGNIFICANT 2Q11 SALE TRANSACTIONS

BUILDING MARKET BUYER SQUARE FEET PURCHASE PRIC

Sobrato Nine Building Portfolio Silicon Valley LBA Realty 729,033 $82,000,00

Capmark Eight Building Portfolio Silicon Valley Rockpoint/Embarcadero 538,694 $68,686,48

1050-1090 Kifer Road Sunnyvale Intuitive Surgical, Inc. 235,109 N/

SIGNIFICANT 2Q11 CONSTRUCTION COMPLETIONS

BUILDING MARKET MAJOR TENANT SQUARE FEET COMPLETION DAT

N/A

SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATION

BUILDING MARKET MAJOR TENANT SQUARE FEET COMPLETION DAT

2972 Stender Way (Data Center) Santa Clara 100,000 3Q1

555 Reed Street (Data Center) Santa Clara 180,000 3Q1