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The second half of 2006 for Palo Alto office space was defined in the local commercial real estate market by solid absorption of Palo Alto office space and the return of large tenants to the marketplace. On the Peninsula, Palo Alto office space included, vacancy rates plunged for every product type over the course of the year, and this trend was particularly accelerated in the last two quarters of 2006. It appears that 2007 will be best remembered for exceptional rent growth across all product types, and particularly for Class A office space in the Palo Alto office space market. In some Palo Alto office space markets, asking rents for Class A office have jumped by as much as a third. Palo Alto office space is especially noteworthy, with rents tracking nearly 35% above the same time last year, as is San Mateo, which has shown similar growth in rents for Class A office space over the same period.

Perhaps more surprising has been the resurgence of the Peninsula R&D market in addition to the Palo Alto office space market. While the vacancy rate has shown a steady decline over the last two years especially in the Palo Alto office space market, the Palo Alto office space now registered two consecutive quarters at single-digit levels, rents have remained virtually flat over the course of this recovery. This trend has started to change and rent growth in some markets has been quite dramatic. Mountain View, for example, has seen R&D asking rents increase by 30% since the middle of 2006, not to mention the exceptional growth in Palo Alto office space asking rents.

Many notable transactions during the first quarter pushed the broad vacancy rate lower on the Peninsula and in Palo Alto office spaces for the tenth consecutive quarter. Of particular note are R&D leases by Microsoft, for ±44,000 square feet at Shoreline Park in Mountain View (just outside of the downtown Palo Alto office space market), and Space System Loral’s 50,000 square foot commitment, also in Mountain View. On the office front, Instill leased 28,000 square feet in San Mateo, and the Silicon Valley Community Foundation consolidated its locations into ±40,000 square feet in Mountain View. These tenants would have much preferred to have been in the Palo Alto office space market but there was simply no spaces that could fit them.

Sales activity continued at a breakneck pace in late 2006 and early 2007 in the Palo Alto office space market, with many high profile Peninsula buildings and portfolios changing hands. The prices paid for many Class A Palo Alto office space assets strongly suggest rising investor confidence in the local markets. While many Palo Alto office space market watchers have framed the current run-up in lease rates as a direct consequence of ‘rising expectations’, a compelling case can also be made that Palo Alto office space market forces and long-term trends have made this rally inevitable.

Because of Stanford University, the city of Palo Alto is a relatively large office space and R&D market within the Stanford Research Park, downtown Palo Alto, and a few pockets east of Highway 101. Downtown Palo Alto office space is quite famous, and caters to both local residents and people who drive in for the specialty stores. Palo Alto office space is found downtown in several mid and high rise office buildings, or outside the downtown area west and east along Highway 101. Palo Alto is famous for spawning many of the area’s startups in “garage” type space that later went on to become companies like Google, Sun Microsystems, and of course Hewlett Packard. There is little Palo Alto office space in suburban areas, and most of the office space in Palo Alto is found in the Stanford Research Park.

Palo Alto executive office space is also available in small suites, or Palo Alto temporary office space can sometimes be found in month-to-month sublease space for rent. You may query the BuildingSearch.com database for Palo Alto office space locations. Our database is designed to show all office space Palo Alto has to offer. Be sure to use all office space Palo Alto categories in your search request including Office/R&D.