Apple is known for inspiring “gee whiz” reactions to its cutting-edge gizmos such as smartphones, tablets and watches, but now the tech titan is drawing a new round of “wow” responses to its stunning shopping spree for office space, buildings and land in Silicon Valley.
“This is really incredible. It is aggressive. It’s a land grab,” said Chad Leiker, a vice president with Kidder Mathews, a commercial real estate brokerage. “This is a major investment in Silicon Valley. It’s pretty amazing.”
Cupertino-based Apple now has about 25,000 employees in the Santa Clara Valley, but a series of long-term leases and building and land acquisitions over the past four years, including its new under-construction “spaceship” campus for as many as 13,000 workers, would allow the company to nearly double that workforce in the coming years.
Some of the deals will help ease the temporary squeeze on capacity while waiting for the new campus with its unusual circular design to be done in late 2016, but real estate analysts say the string of multiyear leases and outright acquisitions show Apple’s real estate appetite to be a more permanent investment in the region.
“For a company like Apple that is so innovative, the reality is that a lot of their operations have to be here in Silicon Valley,” said John McMahon, an executive vice president with Colliers International, a commercial realty brokerage. “They need to be near the best talent pool. One way of keeping your employee base and expanding it is securing the spots and desks for the intellectual talent and making sure they are there for the next wave.”
While Apple declines to detail what it will do with all that space — whether it be for design, marketing, research or even ventures related to the car market — the company does indicate the land and building deals in Cupertino and beyond to Sunnyvale, Santa Clara and North San Jose show a commitment to its future in the Bay Area as a region.
“We’re proud to call the Bay Area home, and we’re continuing to invest, give back and create a huge number of jobs,” Apple told this newspaper. We want to make a positive impact on every community where we operate and we look forward to doing even more as we continue to grow here.”
An artist’s rendering depicts an aerial view of the Central & Wolfe office development proposed to redevelop a business park currently occupying the 18-acre parcel located at Central Expressway and North Wolfe Road. Apple is said to have entered into an agreement to lease the entire 777,000-square foot campus. (Courtesy HOK Architects and Landbank)
Of course, more building by Apple and other tech firms in Silicon Valley means the thousands of new tech workers filling those cubicles and research labs will be looking for housing and clogging the roads — a worry for regional planners who fret over inadequate mass transit and a shortage of high-density residential units.
“It’s wonderful news that great companies like Apple are expanding in North San Jose rather than in North Texas,” said Carl Guardino, chief executive officer of the Silicon Valley Leadership Group. “This will create job growth for our economy.”
But Guardino acknowledged the challenges posed by such growth.
“The two top concerns we hear about consistently from our member CEOs are housing and traffic, which really are the flip sides of the same coin,” Guardino said. “We need to accommodate more opportunities to build homes.”
Even with those challenges, the economic boom in Silicon Valley that has had a five-year run is one that Apple executives clearly see as sustainable.
Starting with a rental deal in mid-2011 that added 373,000 square feet of office space west of DeAnza College in Cupertino, Apple has leased or bought enough office space, developable land and sites within a 10-mile radius to accommodate roughly 9 million square feet of office and research space.
Apple’s high-profile deals include:
- The lease of a 109,000-square-foot office complex in Sunnyvale on Benecia Avenue in 2011, which was Apple’s first big move into that city.
- A cluster of additional Sunnyvale building leases soon, totaling a combined hundreds of thousands of square feet.
- The long-term lease from owner Peery Arrillaga of two big office buildings totaling 296,000 square feet in Santa Clara on Stevens Creek Boulevard in 2012 — Apple’s first major foray into that city.
- An unprecedented push starting earlier in 2015 into North San Jose through leases or purchases of buildings and land. The various sites, including land approved for large-scale office development, is expansive enough to accommodate a major campus, even bigger than the spaceship, for as many as 20,000 workers.
- The lease of a Sunnyvale campus, also in 2015, whose signature building has a unique curved shape and is like a second spaceship complex with 777,000 square feet.
And that is on top of the 2.8 million square feet at the spaceship campus in Cupertino, a short distance from the company’s current headquarters at Infinite Loop.
Altogether that’s more square footage than the combined retail space of Westfield Valley Fair, Sunvalley Mall, Eastridge Mall, Stanford Shopping Center, Hillsdale Shopping Center and Stoneridge Mall.
“If you believe in the future strength of Silicon Valley and the Bay Area, why not find properties so they have locations for five, 10, 15, 20 years down the road?” said Edward Del Beccaro, managing director of the Silicon Valley and East Bay offices of Transwestern, a commercial realty firm.
“Apple is being very forward looking with this activity,” said Tim Bajarin, principal analyst with Campbell-based Creative Strategies, which tracks the tech industry.
The technology giant may be banking land and buildings for future use.
“Apple always has its strategic plans on a five- to seven-year loop,” Bajarin said.
Apple officials are quick to note that Cupertino will remain the company’s headquarters, where it has been based since 1976, as well as the primary focus of its research and development operations.
But creating two major satellite campuses — one in North San Jose and the other in Sunnyvale — gives the company room to grow. It is also leasing space in San Francisco.
While other tech giants like Google, Facebook, LinkedIn, Uber and Salesforce have also been adding real estate to their portfolios, Apple is in a category all its own.
“We haven’t seen anything like this growth,” said Clark Steele, research director for the Santa Clara office of commercial real estate brokerage Newmark Cornish & Carey. “Google’s real estate transactions are the only current ones that are comparable to what Apple is doing.”
Apple’s push to plant its flags in numerous cities well beyond the company’s home territory is a growth spurt that will bolster the Bay Area economy, according to industry experts. Plus, Apple, with projects such as its new campus, is creating an estimated 12,600 construction jobs over the course of building the facility. Much of this is union employment, including 2,000 to 3,000 union workers currently on site, according to the company.
“Companies like Apple and Google are planning for expansion, and all of this will mean more jobs for the Bay Area,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “It’s a vote of confidence in Silicon Valley.”
Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.
By the numbers
1976: Apple is established in Cupertino
13,000: Apple employees expected to work in Cupertino “spaceship” headquarters
25,000: Number of Apple employees in Bay Area
27,900: Number of additional employees Apple could add as a result of its property deals over the first 10 months of 2015, transactions that include leases, subleases, building purchases, or acquisitions of land or other sites that could be developed into modern new offices
3.06 million: Combined square footage of office or research space that Apple leased in deals made during 2011, 2012, 2013, and 2014
5.58 million: The amount of square footage that Apple could occupy in existing buildings, or develop into modern offices on sites in north San Jose and Sunnyvale that the company obtained during the first 10 months of 2015