Talk about money: Scotts Valley commercial space aplenty

The boom-and-bust nature of high tech has left Scotts Valley with a record amount of empty office space, and it’s likely to stay empty for years.
The vast majority of the space is in the Enterprise Technology Centre (formerly Borland) and on the campuses of Seagate, which moves to Cupertino this spring, and Aviza, which filed for bankruptcy. Demand for huge spaces of the sort has vanished.
“If you’re a marketing person like me, you just take those buildings off the radar,” said commercial realty broker Matt Shelton of J.R. Parrish in Santa Cruz.
Small office spaces are filling up, Shelton explained, but large buildings aren’t.
“If you’re a business looking for 1,000 square feet on the ground floor, there are maybe five buildings I could show you,” he said. “But if you wanted 20,000 square feet, I could show you 15.”
He said the days of big tech companies in Scotts Valley are over, for the foreseeable future.
“If you’re a company that has outgrown your 5,000 or 10,000 square feet in Scotts Valley, your next move is to San Jose,” he said.
Rents are cheap in San Jose. The supply of cutting-edge workers is abundant. And that’s where the venture capitalists who fund start-ups want them to be.
Venture capitalists might have one CEO running three start-up companies, Shelton said. They don’t want the CEO driving over the hill to run a firm in Scotts Valley and then dashing back to San Jose to run two others.
If the tech economy booms again, commercial rents rise and the labor market gets tight, then maybe tech firms will again settle in Scotts Valley. But that’s a long way off, Shelton said.
In the meantime, businesses looking to lease space in Scotts Valley can find good deals. Offices that went for $2 a square foot a few years ago now go for $1.50, said Brian O’Connor, an agent with Wilson Bros. Commercial in Santa Cruz. He said it’s still a renter’s market.
“We have a tech firm looking for office space that made a super-lowball offer on the rent and only wants a one-year lease,” O’Connor said. “A few years ago, they would have paid the asking price and signed for five years.”
Steve Sheldon, co-founder of Sheldon Wiseman Commercial Real Estate, agrees that a glut of space is driving prices down. But he sees a pickup in demand for office space, especially from small and midsize tenants.
He called the Enterprise Technology Centre “the highest quality office space on the West Coast.”
As for Aviza, he said he’s heard that the property is being sold to a developer that plans to convert it to housing.
Shelton said he thinks Scotts Valley would be better off if it attracted more stable businesses, rather than high-tech firms that build huge offices in boom times and then leave them empty after a bust.
“With these tech companies, either they’re on fire or they’re going out of business,” Shelton said.
Mark Rosenberg is an investment consultant for Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 439-9910 or [email protected].