Survey: Silicon Valley’s commercial real estate market won’t improve until 2011

A survey of commercial real estate released Wednesday by Allen Matkins/UCLA Anderson Forecast predicts Silicon Valley’s market will not improve until 2011.

The valley’s market will lag in Los Angeles and San Francisco, both of which are expected to turn by the end of 2010.

“For the Silicon Valley it appears that 2011 is a turning point, but the data is less clear,” said Jerry Nickelsburg, a senior economist and author of the survey, in a prepared statement.

Nickelsburg said surveying all three Bay Area markets – San Francisco, the East Bay and Silicon Valley – showed that each will show a decline in occupancy and rental rates for the next three years.

In the South Bay, vacancy rates will rise to 17.5 percent by the end of 2010 and rental rates will rise at the rate of inflation, according to models used by the economic outlooks.

Even as the picture improves in 2011 though, the forecast does not predict a return to the “relatively low vacancy rates of early 2007, nor much growth in rental rates.”

The East Bay will fare slightly worse than the rest of the region because it was more exposed to the housing downturn and more reliant on finance and professional service jobs, both of which have suffered losses.

“The panel and the model are both gloomy about the near term in the East Bay,” according to the report.

Katherine Conrad can be reached at 408.299.1820 or kconrad@bizjournals.com.