Silicon Valley 'Bloodbath' Leaves Entire Office Buildings Empty | Hacker News Reader

Silicon Valley 'Bloodbath' Leaves Entire Office Buildings Empty

businessweek.com

22 pointsfiaz18 comments

My startup actually just got some really awesome free office space in the ground floor of a building where the company went from 100 people to four. They are still paying 40k a month on the lease and have a year and a half left, so one of the employees is just letting us work there until someone else leases the space. It's pretty amazing though; right now my office is actually a conference room surrounded on two sides by glass and overlooking a duck pond.

The article left out the fact that most of this commercial real estate excess is left over from the dot com bust. At the height of prosperity between the bust and the most recent financial trouble the vacancy rate was still around 16% compared to the 21% it is now. And unless you get somewhat lucky, most owners in the valley still make more money by only partially leasing their building at a higher cost than fully leasing it at relatively low prices. So, while you may here a few stories of people getting decent lease rates they are the small minority.

And I don't see how they article or title infers anything about the state of tech as others have mentioned other than that it says Silicon Valley. While this term is typically used to describe the tech industry in the area it has become a more generic term for the south bay. The article makes it clear that it is a real estate problem and that some tech companies are benefiting from the over-speculation.

This seems to me like a unique opportunity for next-gen startup incubators and the coworking movement to lease space at rates that would enable startup entrepreneurs to use the kind of digs that are normally completely outside of their reach.

Still an order of magnitude more expensive than most other cities.

And still for good reason.

I'd love to hear your rationale.

I recently landed at a small startup in San Diego. We're downtown in class A office space, 16th floor with a Pacific view, and we pay less than $2.50/sqft.

I'm having a hard time seeing how being in the bay area is worth 13× the price during a glut, but I've only worked here in San Diego so I could definitely use some perspective.

Not 13x (the $34.56 figure for average rents for Class A space, as mentioned in the article, refers to annual rent - your $2.50 number is monthly). Thus, roughly comparable at this point, or at least not much of a rental premium to be in Silicon Valley.

How many startups in San Diego get someone to give them money to pay their rent? How many in the Bay Area?

Any questions?

We're in the heart of the peninsula, Redwood City - pretty Decent digs (Former Excite/@Home) Area - in the neighborhood of $1.25/Square Foot/month. Our predecessor was was paying $0.95/square foot/month.

Based on my (rather limited sample) my analysis of the article is that the rates being quoted were per _year_, not per month.

$2.50/SqFt per month is pretty expensive unless you are in Downtown San Francisco.

Are you in the old Excite@Home building that has the Stanford name on it now? Those offices were incredible, with the slide from the 4th floor to the 1st. Ahh, the fall of the silicon empire!

Nope, we're on the other side of Broadway, in the building with a slide from the second to the first. That Slide, thought, has been boarded off. Rumor has it someone broke their ankle on it at some time.

Ahh I know which building you mean. Fun stuff though. You should rip the boards off the slides, get a video camera and post to youtube! Never let caution get in the way of fun!

I'm not sure this isn't still a leftover from the original dot-com era bust and the existing real estate bubble issues.

This doesn't seem like a reflection on the state of tech in Silicon Valley (which the title infers) but the state of over-speculation in area commercial real-estate.

This is a good thing for tech companies.

Perhaps a better headline would have been "Silicon Valley Commercial Real Estate Speculation Leaves Entire Office Buildings Empty."

There's a lot of space left over from the dot-com run-up, and it's built for a profile of VC-funded startup that's been on the decline since the bubble burst. A lot of the empty space I see in the south bay is of the old 'big open space in the middle surrounded by offices' model that assumes the big, florescent-lit cubicle farm that used to be the norm.

So the space is there, but it's a good thing for a type of tech company that seems to be getting rarer.

"Commercial property foreclosures will at least double in 2010 and job growth won't return for two years after that, held back by U.S. consumers who are saving more and 'getting back in line with sustainable spending habits,' Haveman said."

That suggests that the return to a boom economy is still a long way off, as commercial property investments absorb a lot of capital, and bearing those losses will cause many spending cutbacks throughout the economy.

This is a good observation about the macro economy in Silicon Valley but the activity level for early-stage startups is now strong and getting stronger (VC-funded startups still lag) - for the right startups, this is a very good time to launch and develop in anticipation of an eventual recovery.

Agree with your point that the broad recovery is still quite a ways off (lesson for startups: don't get overextended in the short term as you build).

That's what people have been predicting. The glut in commercial real estate has been talked about since 2006; the recession just gave it an extra push over the edge.

A lot of people say that subprime was just Act 1 in the financial crisis. Act 2 will be the bursting of Alt-A, prime, and commercial mortgages in the latter half of 2010. And the total dollar value of those loans is significantly higher than all the subprime loans outstanding in 2006.

You can see for yourself if you drive down Shoreline in Mountain View or any of office parks on 101. "Office space for Lease - Call 555-555-5555" signs everywhere. It's not unique to Silicon Valley either - I was just back to the Boston suburbs for Christmas Eve, and then down in NYC for Christmas, and all the commercial zones are filled with "For Lease" signs, one after the other.

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