When a megadeal lands in Silicon Valley, there's a decent chance veteran Bay Area commercial real estate broker Phil Mahoney had a hand in making it happen.
Google's 715,000-square-foot lease in Sunnyvale. The 600,000-square-foot campus for LinkedIn in Sunnyvale. A Sunnyvale lease for 600,000 square feet for a new campus to be occupied by Amazon unit Lab 126. The just-concluded 100,000-square-foot deal for Softbank affiliate Starburst in San Carlos. Mahoney, an executive vice president with the Santa Clara office of Cornish & Carey Commercial Newmark Knight Frank, helped guide all of these to a successful conclusion.
Each year, Mahoney kicks off the Cornish & Carey annual forecast for the commercial property sector in the South Bay. This newspaper recently spoke with him about his outlook for the Silicon Valley commercial property sector. Mahoney's comments have been edited for length and clarity.
Q How do you see the Silicon Valley market in 2013?
A There is no way that 2013 will repeat what occurred in 2011 and 2012. Those were incredible years, and there was so much space leased that it was not sustainable. We never expected that this year would be like either of those years. The market is taking a bit of a breather in that tenants have absorbed millions of square feet. Much of that square footage that was leased the last year is now being retrofitted for occupancy.
Q How long might this breather last?
A We see 2014 returning to a very strong leasing mode when companies have digested what they took in in 2011 and 2012. Late 2013 and into 2014 should be very good.
Q What is driving the leasing?
A This is all underpinned by a strong economy, a good tech economy. The economy is strong enough to withstand problems, whether they be things such as North Korea or budget sequestration.
Q Is it helpful that there is a breather?
A If you are a property owner with a big empty building, now is not a good time to take a breather. But it is healthy in that it gives transportation infrastructure time to catch up to all the leasing that has occurred. And if you get into an overheated situation, you can get an overbuilt market, which isn't good.
Q San Francisco's mayor has said his city is the innovation capital of the world, which suggests San Francisco overshadows Silicon Valley. Is that assessment on target, or off target?
A I'd say the reports of San Francisco becoming the new Silicon Valley are overdone. Quietly, some of the larger tech companies are starting to push back a little bit on the whole San Francisco scene. There is a little bit of a wait and see about how it all works out. Some of companies have deferred major expansions in San Francisco and are doing it in the Santa Clara Valley proper instead.
Q Is the current surge in tech leasing like the dot-com boom that became a bubble, or is this the real deal?
A There is no comparison. This time there are no Pets.com, no Webvan. There is very little fluff we can see. These are real companies with real revenues and real profits. They don't just depend on eyeballs looking at their websites.
Q How strong is the current crop of tenants?
A Never in my 30 years have I seen this number of creditworthy tenants in the market. Amazon, Google, Apple, LinkedIn, Facebook, Microsoft, Juniper, these are strong multibillion-dollar companies with healthy balance sheets.
Q This tech boom looks to be here for a while?
A This definitely has legs. We are probably in the middle innings of a recovery in Silicon Valley.
Contact George Avalos at 408-373-3556 or 925-977-8477. Follow him at Twitter.com/george_avalos.
Birthplace: Cambridge, Mass.
Company: Cornish & Carey Newmark Knight Frank
Position: Executive vice president
Residence: Los Altos Hills
Five things about Phil Mahoney
He was a lifeguard on Cape Cod while in college.
He is a former college football player, a starting defensive end with Stanford University and a teammate of NFL Hall of Fame quarterback John Elway.
He has lived in England, in a small town on the Thames River as part of a Stanford overseas program.
He once skied in Scotland.
When he began his current career, he had three jobs: commercial real estate broker, a mover for a moving company, and a bouncer at a Palo Alto night club