Silicon Valley real estate: TikTok expands as other tech companies move out
SAN JOSE, Calif. - While one tech company foreclosed its office space in the South Bay, another now has plans to expand. TikTok announced it completed a new rental deal for a tech building in San Jose. The move reflects the real estate market slowly making its way back after the pandemic.
It’s been four years since the pandemic began and a San Jose-based analyst says commercial real estate took a major hit. Still, there are a few bright spots that continue to thrive in Silicon Valley.
"The South Bay, it’s a super choppy market where the A-list buildings are doing well and the B, B- buildings are doing poorly," said Bob Staedler, Principal Consultant at Silicon Valley Synergy.
Bob Staedler has been working in Silicon Valley commercial real estate for over 25 years, and he says right now, the region is experiencing the highs and lows of the post-pandemic market.
"The Coleman Highlines and Santana West across from Santana Row are going to continue to do well. They’re going to pull tenants from the smaller areas because they can," said Staedler.
Staedler says downtown San Jose continues to have significant value, offering more space for lower costs than San Francisco. Last October, San Jose Mayor Matt Mahan also announced the city would explore incentives to attract more A.I. companies and potential commercial tenants. TikTok, which already has office space at San Jose’s Coleman Highline tech campus, is now subleasing more space there.
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"They’re subleasing adjacent to themselves. Everybody needs more space when you’re getting more engineers, getting more marketing. I think until they’re told differently, TikTok is going to keep doing what TikTok’s doing," said Staedler.
Still, buildings that aren’t attracting major companies as tenants are struggling. An office building located at 110 Baytech Drive in North San Jose has recently been foreclosed. It’s the second time the ownership group Alviso Park, LLC, defaulted on the loan since 2019.
"Not enough revenue is coming in because the building is either empty or not fully occupied. Lenders are doing all they can, but they’ve got balance sheet issues as well. So, at some point, they have to look the lender in the eye and say, ‘We’ve given you enough time, and we have to take it back’," said Staedler.
Staedler also says though the market is up and down in the South Bay, he doesn’t expect to see a massive wave of commercial foreclosures in the near future.
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