Silicon Valley Reeling Under High Vacancy Rates (CBG, AMAT, JAVA, ADBE)
According to a report published in Bloomberg, the Silicon Valley is suffering from a glut of empty high rises and office parks ever since the dot-com bust. As a result, owners of commercial properties around this region are unable to sustain average rents.
CB Richard Ellis Group Inc (NYSE: CBG) indicated that over 43 million square feet (4 million square meters), an equivalent of 15 Empire State Buildings, were vacant at the end of 3Q09, marking the highest vacancy in about five years. Meanwhile, 11 empty office buildings, accounting for about 3 million square feet of the best quality space, are lying vacant in San Jose, Sunnyvale and Palo Alto.
According to Jon Haveman of Beacon Economics, a consulting firm in San Rafael, California, the situation in the Silicon Valley is similar to the bubble bursting in the residential market. He also predicts that the vacancy levels are unlikely to decline in the foreseeable future.
Haveman has also forecasted the doubling of commercial property foreclosures in 2010. Job growth in the area, which has seen enormous cuts by Applied Materials Inc (NASDAQ: AMAT), Sun Microsystems Inc (NASDAQ: JAVA) and Adobe Systems Inc (NASDAQ: ADBE), may not return for another two years, he added.
