The San Jose-Silicon Valley region “is engaged in a war for talent” with competing metropolitan areas worldwide, San Jose Mayor Sam Liccardo said at a Silicon Valley Business Journal Economic Forecast event on Wednesday, a battle that “will very much determine the future of prosperity of our region for the next decade.”
“Today the highly talented workers are increasingly choosing where they want to live before they choose who they want to work for, and this is a change that’s unique,” Liccardo said in a keynote address. “Most importantly as we see those talented employees choose where they want to live, we will see employers follow.”
Liccardo spoke to a crowd of more than 350 people at the City National Civic in his most extensive comments yet on business issues since being sworn in this month. He takes office at a pivotal economic moment: Stocks are soaring, interest rates are down and major corporations are hiring in droves. But Silicon Valley’s grip on growth is more tenuous than it seems, Liccardo said, as companies spend millions on bus networks to ferry workers from San Francisco.
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“That’s a lot of money they’re spending, and over time they stop spending money on transit and decide to locate where those workers are choosing to live,” Liccardo said.
Liccardo said the future competitiveness of Silicon Valley lies in creating urban environments where 20-somethings want to live and work, highlighting his own city’s willingness to approve dense projects that wouldn’t see the light of day in other municipalities. He also pitched a new program — still in the works — to incentivize rehabilitation of older industrial buildings for manufacturing uses.
‘Ladies and gentlemen, that’s a party’
There will likely be plenty of takers. The year just ended was a blockbuster for the commercial real estate industry, with 22 million square feet in leases signed, according to Sethena Leiker, senior analyst at Cushman & Wakefield’s San Jose office, who presented research at the event.
The brokerage is tracking about 9.5 million square feet in current new requirements, she said. About 10.7 million square feet of new space is in development but nearly 75 percent of that is spoken for. Investment sales volume exceeded the previous peak set in 2007.
Companies such as Box Inc. and ServiceNow are actually taking more space than they currently need on the expectation that the space will become necessary, Leiker said.
“What they cannot afford is for their business to be hindered at all by running out of space,” Leiker said.
The era of good feelings extended in a panel moderated by Business Journal Editor Greg Baumann that included Liccardo, Deke Hunter, partner at development firm Hunter/Storm LLC,
and Amity Milllhiser, managing partner at PwC’s Silicon Valley office.
Hunter said he’s seeing a lot of interest in Coleman Highline, the company’s office campus now under construction near the Santa Clara Caltrain station.
“We’re in the heavy dating phase,” Hunter said, declining to name names of potential tenants who are interested.
Reflecting on the strengths of the South Bay, Hunter said the region benefits from companies who want to have the space available scale — something that is tougher to bank in the
northern parts of Silicon Valley.
One company with a lot of scale is Bass Pro Shops, which Hunter’s firm landed at its under-construction Almaden Ranch retail center. The 140,000squarefoot
outdoor store includes a giant aquarium and bowling alley. Hunter said the store is on track to be open early next year.
“People drive 500 miles to one of their stores. They typically stay overnight. That’s how great they do,” he said.
Liccardo added a new installment to Silicon Valley’s favorite commercial real estate parlor game, the speculation around a proposed 2 million square-foot project in San Jose near
Brokaw Road that’s being pushed forward by the Peery-Arrillaga development firm.
Former Mayor Chuck Reed arranged for city incentives to give life to the project without ever disclosing who the potential tenant might be. He left office without disclosing the identity of the party.
Today, Liccardo said Reed hasn’t passed along that information.
Nathan Donato-Weinstein covers commercial real estate and transportation for the Silicon Valley Business Journal.