Office parks polishing for tenants

Silicon Valley / San Jose Business Journal - July 20, 2007

by Brad Berton

At any point along Silicon Valley's notoriously boom-and-bust business and real estate cycles, geographic location remains the single most meaningful factor as commercial tenants select facilities.

But now that talent recruiting has become an issue again with the tech-sector's revitalization and a tightened skilled-labor market, companies are increasingly emphasizing employee recruitment and retention in deciding which business parks they're willing to call home.

Accordingly once corporate real estate executives calculate rental rates their company can afford and pin down acceptable locations, a tenant's choice of a specific site in many cases comes down to a short list of employee-friendly factors.

And upscale business parks featuring supportive recreational facilities as well as cafeterias and refreshment venues seem to be garnering a disproportionate share of the corporate nods these days, according to several active "tenant rep"-type commercial brokers.

For many employers it's a matter of helping hard-working employees maximize family time, says George Fox, the senior vice president overseeing the Studley corporate specialist brokerage's Palo Alto office. The less time key employees spend traveling from work sites to rec facilities and eateries, the more time they're able to spend with their families after taking care of business, he elaborates.

Indeed, on-site recreational and food-service facilities are key motivations behind recent moves by Studley technology clients including Polycom Inc., Magma Design Automation and Eidos Interactive Ltd.

And as Fox and others emphasize, landlords able to offer a prestigious address along with a strong combination of technological and practical amenities are usually the most formidable players in today's still-competitive marketplace.

In other words, a high-image business park featuring plentiful lab or "clean room" facilities, an on-site cafeteria and a workout center has become a much easier sell in the valley than a tired, amenity-challenged facility. While location is by far the most important consideration, a business park's amenities can boost a tenant's productivity and also help recruit and retain critical employees, observes Andy Poppink, senior vice president at The Staubach Co. in Palo Alto.

Indeed even as robust tenant demand continues narrowing facilities options available to sizable Silicon Valley companies, many businesses just wouldn't ask employees to work at a less-than-prestigious address, agrees Marty Chiechi, senior vice president with Grubb & Ellis Co. in San Jose.

For instance, once Chiechi's client Sirenza Microdevices Inc. determined acceptable locations for a new facility from which its techies will design communications-equipment components, "high image" was the most important factor attracting the company to North Pointe Business Park along East Tasman Drive in north San Jose. Sirenza recently leased just under 35,500 square feet at the 105 E. Tasman building within the business park, which is owned by big institutional advisor RREEF.

"The quality of the building is what first attracted Sirenza to the Tasman property," Chiechi notes. "A lot of companies really want to stick with the high-image, high-end buildings, so it's becoming a lot tougher to lease the Class-B and Class-C properties." But the available lab space was an important factor as well, as was the office's "plug-and-play" condition, meaning furnishings allowed for quick and easy occupancy, Chiechi adds.

Prospects for efficient build-out of customized lab space likewise helped attract Alexza Pharmaceuticals Inc. to the Britannia Shoreline business park in Mountain View, adds Mark Pearson, principal with the Cresa Partners tenant representation specialist's Palo Alto office. Landlord Slough Estates USA has transformed the former Silicon Graphics campus into a nice fit for biotech companies, with plenty of power along with high ceilings creating attractive laboratories, Pearson explains.

Alexza, whose key technology is the Staccato inhaler, plans to occupy 65,000 square feet of lab and pilot manufacturing space at the complex, followed by another approximately 42,000 feet of corporate and executive offices. The facility has room to accommodate Alexza's potential expansion needs as well, Pearson adds.

And Slough Estates also sweetened the pot by agreeing to finance customized build-out of Alexza's facilities. "Biotech companies want to preserve cash and prefer not to have to (pay up front) for their tenant improvements," Pearson continues, "and there are really only a handful of landlords who are willing to do that."

The complex's tennis courts, baseball diamond and other recreational facilities are "icing on the cake" for the tenant, as is the business park's shuttle to the nearby Caltrain station, Pearson adds.

But the recreation factor was truly meaningful to the trio of Studley clients that recently made sizable commitments to high-quality local business parks.

In addition to locational considerations including proximity to Mineta airport and the commuter transportation infrastructure, Fox says Magma opted for the Skyport Plaza park in San Jose due in great part to the on-site food service and 16,000-foot health club (even a regulation-sized basketball court) along with the ability to secure prominent signage for the company at the high-profile complex.

"They can have sandwiches delivered (almost instantly) and can hit the gym right next door at a discounted price as a Skyport Plaza tenant," adds Fox, who negotiated on the design software developer's behalf along with Anne Ralston and Todd Shaffer of Cornish & Carey Commercial. Magma just moved into five floors totaling about 107,000 square feet at the business park owned by Equity Office Properties.

A bit further north, "collaborative communications" technology company Polycom's new facility amounts to something of a "tenant's dream" with its heavy recreational amenity package including both volleyball and basketball courts. Polycom significantly upgraded its valley facility in leasing about 86,000 square feet at CarrAmerica Realty's 3553 North First property in north San Jose.

Further northwest in Redwood City, Fox and associates helped the Eidos Interactive video game group consolidate operations from Menlo Park and San Francisco into about 62,000 square feet at the high-end bayfront Redwood Shores business park. No doubt the athletic-minded Eidos team was motivated by the development's soccer fields, swimming pool, indoor climbing wall and related amenities, continues Fox, who was negotiating the lease as Starwood Capital Partners was buying the 1.7 million-square-foot park from developer Jay Paul Co.

Of course as Staubach's Poppink stresses, that old "location location location" adage holds true today as ever. He recalls a client whose higher-ups selected a nearby Mountain View site because they were afraid they'd lose some key engineers if the company didn't remain a short walk from the ever-popular County Deli on Shoreline Boulevard.

Brad Berton is a freelance writer specializing in real estate. He is based in Portland, Ore.