GOLDEN TRIANGLE RUNNING OUT OF ROOM 
TECH BOOM EATS UP PRIME SILICON VALLEY INDUSTRIAL LOCATION 

Published: Sunday, August 18, 1996 

JAMES J. MITCHELL, Business Columnist 

Silicon Valley's Golden Triangle, one of the region's prime commercial real
estate areas, is filling up.

The land, bounded by highways 101, 880 and 237, is home to about
100,000 workers and more than 2,000 companies, ranging from Intel
Corp., Cisco Systems Inc. and Quantum Corp. to small sandwich shops
and electronics suppliers. Largely farms and orchards until the 1980s, the
area is coveted by companies because of its convenient location and the
availability of relatively large tracts of land.

But there's not much available land left. A surge in demand since last year,
particularly from networking companies, has shrunk the amount of
developable industrial land not owned by high-tech companies to about
500 acres. While that sounds like a lot, it's about the same amount of land
as was purchased or put in escrow over the last 20 months. There's
additional land nearby, particularly north of Highway 237. But it doesn't
have the same cachet.

''People are having to look elsewhere,'' including in Fremont, South San
Jose, in Morgan Hill and in the Livermore and Pleasanton ar eas, said
Andre Walewski, senior vice president of the land division of Colliers
Parrish International, a commercial real estate broker. For many, that will
mean longer trips to suppliers and customers and longer commutes.

Supply down, prices up

The full development of the Golden Triangle has many other
consequences: higher real estate prices; increased tax revenues for San
Jose, Santa Clara and Milpitas, where most of the triangle is located; and
the growing attractiveness of tearing down old buildings and replacing
them with larger structures.

Land purchases in the Golden Triangle are so infrequent it's difficult to
value the land. But recent sales went in the low $20s per square foot -
compared with about $15 a square foot for land north of Highway 237, said
Chip Macdonald, a senior vice president of CPS, a commercial property
services company.

Even in outlying areas, industrial real estate prices are climbing. The cost
of land in the Edenvale area in South San Jose has jumped from $6 to $11
a square foot in the last year, said Rick Neely, chief financial officer for
Sanmina Corp., a contract manufacturer based in San Jose that has been
looking for space to grow.

''Like many companies, we're in a bind,'' he said. ''We're crossing our
fingers the market will cool off before we absolutely run out of space.''

Higher costs are forcing companies to look at buildings they wouldn't have
considered before. One fast-growing service provider in the Golden
Triangle that needs 100,000 square feet is thinking of leasing a warehouse
and converting it to office use, Macdonald said.

''Any company growing rapidly has a real concern for the availability of
space,'' he said.

That's one reason a few high-tech companies are buying land they don't
need right away. For example Adaptec Inc., which has leased all the space
that has come on the market near its Milpitas headquarters, bought 40
acres off Highway 680 in Fremont in March and doesn't expect to develop
the property for at least a year.

Boom unexpected

The rapid increase in demand for Golden Triangle land was unexpected. In
1993, outside consultants told the city of San Jose that North San Jose,
including about 400 acres of vacant industrial land outside the Golden
Triangle, ''could build out within the next 10 to 15 years.''

The consultants' report provided ammunition to housing developers, who
wanted the city to rezone industrial land for housing. But the city council in
most cases refused. As a result, ''We're well-positioned to accommodate
industrial growth'' in Edenvale, South San Jose, Evergreen and Coyote
Valley, said Gary Schoennauer, San Jose's director of planning.

To the casual passer-by, there appears to be plenty of land left in the
Golden Triangle. But some of the fields that appear available are owned by
high-tech companies that say they're not interested in selling.
Hewlett-Packard Co., for example, has 71 undeveloped acres near its site
off Trimble Road near Highway 101.

There also are a few parcels that might be put up for sale. Foremost of
these is 48 acres off North First Street owned by Novell Inc., which would
sell them if it decides to move downtown. City officials expect a decision by
year-end.

The state owns about 200 acres west of Agnews Hospital, and about half of
that might be used for industrial development, Macdonald said.

Several large pieces of land in the Golden Triangle are being sold for
development. Cisco, for example, expects to buy about 153 acres north
and east of Agnews Hospital for a campus that could employ 10,000
people. 3Com Corp. has a 67-acre parcel in escrow. And one 90-acre tract,
at North First and River Oaks streets, will be used for housing.

Because of the shortage of developable land, high-tech companies are
rethinking what they consider acceptable space configurations. Many
executives are willing to move to three- and four-story buildings.

City officials are studying the possibility of allowing existing buildings near
North First Street in the Golden Triangle to be torn down and replaced with
structures that will house more people. Higher densities are possible
because these structures are close enough to light right to require fewer
parking spaces.

''Trying to figure out how we can accommodate more intense use'' of the
Golden Triangle ''is one of our challenges over the next number of years,''
said John Weis, director of neighborhood and industrial development for
the San Jose Redevelopment Agency. 

Copyright 1996, The San Jose Mercury News.