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.

Phil Mahoney
Age: 53
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

Article source: http://www.insidebayarea.com/breaking-news/ci_23115274/chat-commercial-real-estate-broker-phil-mahoney

The Sobrato Organization, an iconic Silicon Valley developer, has sold a portfolio of buildings and land in Fremont, San Jose and Sunnyvale for a reported $80 million, in a deal that suggests investors think the tech sector has bounced back.

All told, 10 properties totaling 675,000 square feet, along with 2.7 acres of land, were involved in the April deal, brokers from CB Richard Ellis, a commercial realty firm, said Wednesday.

“The sale of the portfolio was part of a major diversification strategy that we have,” said Michael Field, director of commercial real estate for Cupertino-based Sobrato.

However, the deal also suggests that investors have become more bullish about the Bay Area economy overall — and Silicon Valley’s prospects in particular.

“People are betting that Silicon Valley is back in a big way,” said Jim Beeger, a senior vice president with Colliers International.

LBA Realty snapped up nine of the 10 properties, including the land. One of the Fremont buildings was sold by Sobrato to West Coast Quartz, which makes silicon and quartz components for semiconductor manufacturers.

Industry insiders think Sobrato obtained a sale price of about $80 million, or about $120 per square foot, for the sale of the 10 properties.

Sobrato and LBA executives didn’t officially discuss the financial details.

With Silicon Valley companies snapping up buildings at a swift pace, LBA has a decent chance to enjoy

appreciation in rental rates in the coming years.

“LBA should see some rent spikes over time,” said Rob Shannon, a senior vice president with CB Richard Ellis. “They bought a very stabilized portfolio. About 75 percent of it has long-term leases in place.”

High-quality tenants such as Asus Computer, Western Digital and Flextronics are among the tenants in the buildings, Shannon said. One building is empty.

The buyers also may be heartened because tech companies appear to still hunger for space.

“Demand is still very strong,” said Joseph Moriarty, a CB Richard Ellis senior vice president. “That helps building values.”

The Sobrato firm, on the heels of this transaction, bought the Fry’s Electronics building in Palo Alto.

“Fry’s will be a building that we will hold for some time,” Field said. “We don’t plan to redevelop it.” The consumer electronics retailer still has several years to go on its lease for the Palo Alto store.

Sobrato further diversified its holdings with a $95 million purchase of a 300,000-square-foot empty office complex in San Francisco’s Mission Bay district. That deal was completed recently.

The LBA-Sobrato deals also extend a period of busy activity for LBA, which has snapped up a number of high-profile complexes.

Among the LBA purchases in recent years was the company’s acquisition of three office towers in the Watergate complex in Emeryville. This past summer, LBA landed a big lease with Clorox, which is moving hundreds of workers a Pleasanton campus that LBA bought a few years ago.

Brokers think LBA is far from finished with its shopping spree.

“LBA is very bullish on the Bay Area,” said Eric Anderson, a vice president with Cornish Carey Commercial, a real estate firm. “They are looking long term. I wouldn’t be surprised if they buy more buildings before long.”

Brokers also think purchases of packages of several buildings in one transaction could be on the rise again. Those deals vanished during the recession.

“Buyers have a lot of money, and they want to put it into commercial real estate,” Beeger said. “In 2010, we literally had one big portfolio sale in Silicon Valley. They were very coming in 2007, and now they are coming back.”

Contact George Avalos at 925-977-8477. Follow him at Twitter.com/george_avalos.

Article source: http://www.mercurynews.com/ci_18089836?source=most_emailed