Sign up for smart news, insights, and analysis on the biggest financial stories of the day.
Remember all that news in the last year about tech companies going remote for good?
Whatever their plans, they aren’t giving up their office space. Silicon Valley went into the Covid-19 pandemic with the lowest office vacancy rate in the U.S. and a new report released Tuesday revealed that nothing’s changed.
Second Time’s The Charm
Office markets have been rocked by the pandemic, but the office vacancy rate in Silicon Valley is just 10.7%. That’s the lowest among 50 U.S. markets surveyed by Jones Lang LaSalle (JLL).
- New York’s office vacancy rate — at 13% — is the highest in three decades, although it’s still the second lowest rate among markets surveyed.
- Austin, a nascent tech hub of its own, had the third lowest vacancy rate at 14.6%.
- The City of San Francisco, which borders Silicon Valley, is struggling with a 16% vacancy rate.
Why it matters: “It suggests the tech companies plan to continue to hire and, one way or another, have a pretty high percentage of their population back in the building,” John Gates, chief executive officer of Americas Markets for JLL, told Bloomberg.
Google, which employs 25,000 in the valley, is opening some of its offices this month, although employees can choose to work from home until at least September.
Valley Thrives as New York Leases Backfire
While Valley leases are holding steady, several New York landlords who signed mega-leases with single tenants for near-whole buildings are now having a major rethink. Blackstone Group is losing its major tenant, L Brands, at a Broadway office and Rudin Management has major leases expiring at a Times Square office tower and AIG’s downtown office. All will likely sit vacant.
Reverse Scenario: Manhattan developers are now increasingly turning to tech-friendly markets, the latest being Tishman Speyer — which owns NYC’s famed Rockefeller Center — adding an office campus in Sunnyvale, California to its portfolio.