Spec building is back on the Peninsula

| August 27, 2014 | 0 Comments

Think the drought is bad?  The drought in new construction that we saw in the decade following the dot-com bust didn’t have quite the same consequences, but it still shows its impact on the local commercial real estate market.   It seemed that speculative (‘spec’) development of office product without a tenant locked and loaded might be gone for the long haul.  We can only hope that the weather changes as drastically as the climate for new construction.

Sobrato’s recently approved 260,000 square foot project in Menlo Park will be built on spec.   Sand Hill Developments similar sized project in the Stanford Research Park (make sure to click through this one to see the renderings– really cool project) was started on spec as well.  Kilroy’s Crossing/900 project is very much under construction.   Latest word on the street has Bay Meadows popping out of the ground on spec, too, along with a few other projects in San Mateo.

There have been times when an explosion of new speculative development has been the first sign of the end of a good market, as everyone jumps on the bandwagon right when the coda starts.   I don’t think that’s the case this time around.   In a tech company driven market (particularly a young tech company driven market), build to suits just don’t fly.  The rumored tenants for two of the spec projects listed above didn’t even exist 10 years ago– probably not yet at a point where they can plan their real estate needs years out.  I’ve written before that there is reason to think that a lack of larger product has actually thrown a bit of a wet blanket on leasing activity– if there’s no supply, the amount of demand really doesn’t matter.   It may be a bit more interesting to see the disposition of some smaller projects in the queue.

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