Table of Contents
- Key Highlights
- Introduction
- A New Era for Office Spaces
- The Appeal of Santana Row
- Market Performance vs. Regional Trends
- Adapting to AI Demand
- Real-World Implications
- Impacts on Housing and Labor Market
- The Broader Outlook
- FAQ
Key Highlights
- Two artificial intelligence firms, Etched and Securiti.ai, have leased 60,400 square feet in the One Santa West building, marking a growing trend of tech companies establishing their presence in San Jose.
- Federal Realty Investment Trust, the landlord, has shifted its leasing strategy to accommodate multiple tenants, leading to increased occupancy in a challenging office market.
- The office vacancy rate in One Santa West is significantly lower than the broader Silicon Valley average, showcasing a rising demand for tech-oriented workspaces.
Introduction
San Jose, often referred to as the heart of Silicon Valley, has seen a remarkable shift in its office landscape due to increased demand from the tech sector. Just last week, two notable artificial intelligence firms—Etched and Securiti.ai—secured significant leases in the modern One Santa West building located in the upscale Santana Row district. This development signals not only the resilience of the office market in the region post-pandemic but highlights a broader trend of AI companies seeking innovative workspaces to accommodate their growth. As these companies expand rapidly, they are reshaping not just office environments but the dynamics of commercial real estate in Silicon Valley.
The influx of AI firms into San Jose raises questions about the future of work, the demand for flexible office space, and the importance of community-oriented work environments in tech culture. In this article, we explore the implications of such trends, the adaptive strategies of real estate firms, historical context of office leasing, and what this means for the local economy.
A New Era for Office Spaces
The recent leases by Etched and Securiti.ai represent a strategic pivot in the commercial real estate market. According to reports, Etched—a company specializing in AI semiconductor chips—has taken 49,500 square feet on the second floor of One Santa West. Meanwhile, Securiti.ai, which provides software solutions to ensure a secure utilization of AI and data, occupies the third floor with 10,900 square feet.
This surge in leasing activity comes after Federal Realty Investment Trust shifted its original plan of leasing the entire building to a single tenant. The decision to fragment space into smaller leases enabled the building to attract multiple tenants, enhancing its attractiveness to companies that may prefer manageable, flexible office arrangements.
Historical Context: The Shift in Office Trends
The pandemic accelerated a trend that began long before COVID-19 intervened. As remote work gained traction, many firms initially opted for scalable spaces, often leading to increased vacancies. Notably, prior to this shift, Silicon Valley was witnessing a corporate war for talent, with companies competing for top-tier office spaces that provided a robust set of amenities.
Federal Realty had initially forecasted leasing the entirety of One Santa West to a single entity, hoping to create a stable, long-term tenant arrangement. However, industry trends demonstrated that many companies prefer the flexibility of smaller, collaborative environments. This prompted Federal Realty to embrace a mixed-tenant model, which has proven beneficial for the occupancy rate of the building, now at 80%.
The Appeal of Santana Row
Santana Row, known for its upscale retail and dining options, is transforming into a sought-after hub for tech companies. The property’s amenities, including easy access to transport and a vibrant social scene, reflect the lifestyle preferences of the modern tech workforce. Jan Sweetnam, Chief Investment Officer for Federal Realty, emphasized that "Santana West is ideal for companies seeking a modern and efficient workspace with the deepest set of amenities and services available."
The community-focused aspect of Santana Row is expected to continue attracting technology firms, particularly those involved in AI, as they value not just the physical space but the cultural environment that fosters innovation and collaboration.
Market Performance vs. Regional Trends
Despite the optimism surrounding One Santa West, the overall office vacancy rate in Silicon Valley has become a pressing issue; vacancy rates hovered around 21.8% in the third quarter of 2025, according to various studies. However, One Santa West’s vacancy at 20% is a positive anomaly that speaks to the building's desirability.
Comparative Analysis of Vacancy Rates
- One Santa West: 20% vacancy
- Silicon Valley: 21.8%
- South Bay: 25.9%
These figures illustrate that while the broader market struggles with high vacancy rates, certain properties—including One Santa West—are successfully increasing occupancy through strategic leasing practices and addressing tenant needs.
Adapting to AI Demand
The recent leasing activity underscores a clear trend: AI firms are leading the charge in the office real estate market. The growing number of AI startups and established companies relocating to San Jose is effectively reshaping the landscape. According to industry reports, 86 leases in San Francisco last year were attributed to AI companies, further enhancing the region's reputation as the "AI capital of the world."
As these companies expand their workforce and physical spaces, the ripple effect can be felt throughout the local economy. Increased hiring often leads to greater demand for local services, stimulating job growth in various sectors ranging from food service to logistics.
Real-World Implications
As AI firms like Etched and Securiti.ai thrive in their new San Jose offices, the implications extend beyond the confines of the office building. Local businesses stand to benefit from the influx of employees who lead active lifestyles, frequenting nearby cafes, restaurants, and stores. Additionally, the demand for tailored office environments reflects an ongoing transformation in workplace culture, as companies seek to create spaces that foster collaboration and innovation.
Moreover, as real estate investment trusts (REITs) and property managers continue to adapt their strategies, the landscape of leasing will likely witness further evolution, paving the way for a new norm in Silicon Valley.
Impacts on Housing and Labor Market
In tandem with the corporate shifts in office occupancy, the housing market is being influenced as well. The growing number of tech workers in the region increases pressure on the already strained housing market. As companies expand and new hires relocate to San Jose, demand for affordable housing further complicates the landscape, necessitating urgent discussion about housing policies and development strategies within the city.
Challenges Ahead
Despite the promising developments in the office leasing space, challenges remain:
- Housing Affordability: With an influx of tech workers, housing prices may continue to climb, potentially exacerbating existing disparities.
- Infrastructure Strain: Traffic congestion and public transport demands may increase, challenging existing city resources.
- Biodiversity: Gradual urban expansion could threaten local ecosystems if not managed.
These challenges present both hurdles and opportunities for city planners, business leaders, and policymakers who must collaborate to create sustainable solutions.
The Broader Outlook
The AI sector's resilience and growth signal a potentially vibrant future for San Jose's economy and the wider region. Continued partnerships between real estate developers and tech firms will likely lead to innovative solutions that address today’s challenges in the working landscape.
Investment in enhanced work environments, along with a focus on integrating amenities that cater to the diverse needs of employees, echoes the evolving expectations of the legions of tech workers. As these demands grow, so too will the necessity for creative and sustainable real estate strategies.
FAQ
What companies recently leased space at One Santa West in San Jose?
Etched and Securiti.ai are the two companies that recently secured leases totaling 60,400 square feet.
What is the current occupancy rate at One Santa West?
The building is currently 80% leased, with a 20% vacancy rate, which is favorable compared to the broader Silicon Valley market.
How has the leasing strategy of Federal Realty changed?
Federal Realty initially intended to lease the entire building to a single tenant but shifted to allowing multiple smaller leases to attract diverse companies seeking flexible space.
Why is Santana Row appealing to tech firms?
Santana Row offers a modern, amenity-rich environment that promotes collaboration and community amongst tech companies and their employees.
What is the significance of AI companies moving to San Jose?
The increasing presence of AI companies signifies a shift in the labor market and presents opportunities for economic growth, impacting local businesses and housing demand.
How does the office market in San Jose compare to Silicon Valley as a whole?
One Santa West maintains lower vacancy rates compared to the overall Silicon Valley average, indicating strong local demand for tech-oriented office spaces.
The growing stature of San Jose as a tech centerpiece highlights an important intersection of culture, technology, and real estate development—a development area to watch in the coming years.