TechCrunch: There’s No More Room In Silicon Valley

| June 27, 2012 | 1 Comment

Quite a bit of discussion in the market about the perceived competition between Silicon Valley and San Francisco for the title of Start-up Central.   An article in TechCrunch this week has continued the discussion but I think has created a false impression of where the broader Silicon Valley office leasing market sits at the moment.

A direct comparison between Silicon Valley and San Francisco’s markets is an apples and oranges discussion.   Really, the TechCrunch article is comparing the more tech-laden areas of The City with the very small markets of downtown Palo Alto and Mtn View– also a stretch.  You can literally count every downtown lease of over 25,000 sf in these two small cities over the last decade on your fingers, but most of the San Francisco deals cited by TechCrunch are quite substantial.  Over the years in downtown Palo Alto, it seems there has always been a Palantir– a single user that gobbles up the lions share of that market– a large tenant is always going to cast a disproportionate shadow in a small town.

I’ve written extensively about the bifurcated market we’re sitting in at the moment.  The broader picture has improved drastically over the last year or so, but the overall vacancy rate in Silicon Valley is still very much in double-figures.   Even in Palo Alto, with the microscopic vacancy in the downtown core, sports a much higher availability rate when looking at the entire city.

The first real wave of tech migration to San Francisco came, of course, during the dot-com boom, and clearly a similar dynamic is driving this wave.  Fast-growth startups doing bleeding edge tech competing for young workers are going where the talent lives.  Will a more stabilized tech world put a higher premium on the more senior employees who’ve migrated to Los Altos?   Maybe, but given the big players like SalesForce, Twitter, et al that have made their long-term intentions on San Francisco pretty clear, I think that we are probably looking at a shift with some legs to it.   Silicon Valley isn’t going to blow away, but it may have grown to include The City.

This is a really solid article, and I agree with the bulk of it.  Polling some of the reaction to the piece on-line tells me that it may have been a bit misunderstood, though.

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  1. We’ll take them in Minneapolis!

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