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Silicon Valley market spotlight

​​​​​​​​​​​Silicon Valley/San Jose is a hot market for tenants and investors alike ... for now. Will the positive momentum continue?​

JLL’s global research team set out to identify the fastest-changing cities across the globe in its recent City Momentum Index report. San Jose—and the greater Silicon Valley—ranked number two. Trailing behind only London, San Jose/Silicon Valley is deemed a city to watch due to short-term socio-economic and commercial real estate momentum, as well as its potential to foster positive change in education, innovation and the environment moving forward. That said, it's important to remember that dynamism doesn't necessarily mean stability.

Why Silicon Valley/San Jose?

This market has one of the fastest growing urban economies in the United States, with growth of almost five percent last year. And in an analysis of direct commercial real estate investment across global markets last year, San Jose/Silicon Valley ranked number 18.

Source: Q1 2015 Global Market Perspective

VC funding volume in Silicon Valley was up 16 percent in 2014 from the previous year, and we don’t see any signs of wavering investor confidence. With fresh capital in their pockets, local companies have been securing new office leases—hoping that killer workspaces will attract and retain tech talent that’s in hot demand.

In fact, the demand for well-located, high image space is so high that companies are spilling over from Palo Alto and Mountain View into Santa Clara and smaller, niche submarkets like Campbell and the San Jose Airport—where office rents have been pushed up by double-digit percentages.

To meet growing needs, new office construction in the Valley is at its highest level since the dot-com era, with more than four million square feet under construction—and nearly 70 percent of it already preleased.

Silicon Valley office market snapshot:

13.8%Total vacancy
2,296,296YTD net abs. (s.f.)
477,442Q4 2014 net abs. (s.f.)
6.2%12-month rent growth
4,284,425Total under const. (s.f.)
67.1%Total preleased
​ ​ Source: Q4 2014 Silicon Valley Office Insight​​