Twenty-one percent of city’s offices are available for lease
Morgan Hill – The amount of office space for lease in Morgan Hill has climbed 18 percent since April, topping 111,000 square feet as of July 1, according to figures supplied by Colliers International.

The increase suggests 21 percent of Morgan Hill’s office space – vacant and occupied – is on the market to lease. It’s the second highest percentage of the 10 Silicon Valley markets studied by Colliers International.

Still, two local commercial real estate brokers downplayed the rise, chalking it up to ordinary market fluctuations.

In other words, no need for alarm, said Mark Sanchez, vice president at Collier International’s Gilroy office. Sanchez pointed out that the number of available square-footage includes offices that are not empty, but waiting to sublet.

R.J. Dyer Real Property Investments Broker Associate Vic Vanni said he’s seen demand grow consistently for office space in Morgan Hill and Gilroy since the speculative dot-com bubble burst in 2001. But even though Vanni thinks the market has progressed over the last three years, he said Morgan Hill’s commercial real estate market is struggling more than Gilroy’s because it’s more tailored to research and development companies. By contrast, Gilroy is more of a manufacturing hub, he said.

“It’s a bit easier to fill small manufacturing (units) than a 60,000 square-foot R&D building,” Vanni said.

The July numbers from Colliers International show Morgan Hill is among three markets in Silicon Valley where office space availability has increased in the last three months. Compared with the North First Street sub-market of San Jose and the airport sub-market of San Jose, Morgan Hill’s rate of increase has climbed the highest.

Morgan Hill Director of Business Assistance and Housing Services Garrett Toy said it’s normal for Bay Area cities to have 10 to 15 percent vacancy rate for office, industrial and commercial property. That Morgan Hill might have a higher rate, he said, i.e. 21 percent, is just a temporary set-back as the Bay Area’s economy continues to recover.

Meanwhile, Toy said the city has contracted with the Morgan Hill Chamber of Commerce to provide supplemental marketing services to lure new companies to Morgan Hill. But he also said there’s only so much the city itself can do to persuade businesses to drop anchor.

“We try to set up an environment to make it as easy as possible to go through the process, but other factors are beyond our control,” Toy said. Those would include proximity to Silicon Valley, major universities, airports and the existing residences of CEO’s and executive management teams, Toy said.

Of course, the biggest factor is price, Toy said.

According to the Colliers numbers, the average price for office space was $2.25 per square foot in Morgan Hill, coming in fourth behind Palo Alto’s $3.24 per square foot.

Morgan Hill City Councilman Greg Sellers, chairman of Community and Economic Development Committee, said the amount of office space currently available on the market would eventually decline as new projects such as the South County courthouse come on line.

“As Silicon Valley continues to heat up the economy, you’ll start to see the return here,” Sellers said.

Tony Burchyns covers Morgan Hill for The Times. Reach him at (408) 779-4106 ext. 201 or [email protected].

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