See a tech bubble forming around the valuation of Silicon Valley firms?
Check out the office market.
The two most expensive streets to rent office space in America run through Silicon Valley. One, Sand Hill Road, along Stanford University’s campus in Palo Alto is so heavily populated by venture capital firms that it has become synonymous to the tech industry the way Wall Street is to banking. In two years, rents have risen 27 percent to $141.60 per square foot, according to an analysis by the services firm JLL.
Next up is a street a few miles away, Hamilton Avenue, also in Palo Alto, at $124.44 per square foot after going up even faster — 31 percent — over the past two years. In 2013, Hamilton wasn’t even on the list of the top 40 most expensive streets.
Sand Hill Road and Hamilton Avenue are also notable for the incredible premiums employers are willing to pay to be on those streets instead of other locations nearby. Having an address on Sand Hill Road or Hamilton Avenue clearly means something valuable enough to companies that they are willing to pay more than double what other buildings in the neighborhood would cost.
Half of the top 10 most expensive streets on the list are from California. But D.C. has its own regular entrant on the list, Pennsylvania Avenue.
Employers on Pennsylvania Avenue pay an average of $72.65 in rent, double what buildings in other parts of D.C. cost. Even though the region’s office market has remained largely flat, developers are pouring investments into redeveloping buildings along the avenue.
Quadrangle Development Corp. is doing a complete overhaul of 1301 Pennsylvania Ave., and has reportedly lured a white shoe law firm to lease space there. Developer Skanska is partnering with George Washington University on a new 250,000-square-foot office building at 2112 Pennsylvania Ave. even though it has no leases announced yet.
Amy Bowser, JLL managing director, said the streets on the list reflect the country’s reigning industries and she didn’t expect “America’s Main Street” to drop off anytime soon.
“No matter what year, the next 10 years or 20 years, Pennsylvania Avenue will still be at the top of the list. It’s an international address. It’s part of our identity and history in D.C. but also the entire country,” she said.
For all the changes in the East End of D.C., in Tysons and elsewhere, having a Pennsylvania Avenue address still stands for power in an exclusive way, Bowser argued.
“It’s very much recognized as a symbol of power and influence. Companies, law firms etc. want to be affiliated with it as a result,” she said.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz