Newmark’s Phil Mahoney talks about the Silicon Valley office market, its future and the “failed strategy” to bet against the mecca of technology in the United States
Google’s decision to recall employees to the office couldn’t have come too soon for Newmark’s Phil Mahoney, who has spent four decades helping expand the Silicon Valley presence of Apple, Amazon and Meta – as long as it is not. transform into Charlie Brown unsuccessful attempts kicking a soccer ball that keeps getting ripped off.
“Every time they say here’s the date, that’s it,” he said in an interview. “They are reluctant to put off a date only to miss it again.”
Charlie Brown’s frustration was an apt image for Mahoney, 61, a defensive end at Stanford University who played under legendary coach Bill Walsh. Mahoney has been the Valley’s top producer by square footage nearly a dozen times, working on deals that include Meta’s 719,000-square-foot office lease in Sunnyvale last year, the largest of its kind in the industry private in 2021.
Mahoney worked as a part-time bouncer and furniture mover after graduation when he got into commercial real estate through pioneering Silicon Valley developer John Arrillaga, who died in January in 84 years old. Arrillaga helped him get an interview with Cornish & Carey Commercial“the only company that would hire me,” Mahoney said.
He was a young stockbroker as the valley began to emerge as the center of the global tech industry, albeit in the midst of a national recession that Featured stagflation and 18% interest rate. Two decades later, he was representing tenants and also marketing offices on behalf of landlords as the dot-com bust erased one in five jobs in the Valley.
It was still there during the Great Recession of 2007 to 2009 that sent stocks plummeting – and more recently as the pandemic brought office work to a complete halt for nearly two years, leaving 15 out of 100 offices in the region. empty by the end of 2021.
Mahoney still believes in the Valley’s ability to reinvent itself, even after tech companies such as Hewlett Packard Enterprise and Tesla moved to Texas during the pandemic and housing prices did the area more unaffordable than ever. Now, as Apple, Meta and Microsoft join Google in setting firm return-to-office dates, it’s optimistic the Valley office market, the weakest sector during the pandemic, will recover.
“It’s a failed strategy to say, ‘You’re not going to grow up in Silicon Valley,'” he said. “You can grow somewhere else, you can grow somewhere else, but even organic growth will happen in the valley, or you’ll be left behind in your industry.”
Admittedly, the region faces headwinds that could spell another The Lucy Van Pelt Moment. The Federal Reserve is committed to raise interest rates to control inflation, more expensive for developers to raise funds for new projects. Oil prices surged following Russia’s invasion of Ukraine, meanwhile, putting more pressure on the Fed to keep rates higher for longer.
Apple, Google, Airbnb and Microsoft, all of which are based in the region or have campuses there, to have pulled their most popular products and services from Russia. Additionally, many tech companies employ Ukrainians.
Yet benchmark lending rates remain historically low, currently hovering around 2.2%, compared to about 5% during the dot-com bust and about 4 percent in 2009.
Also, there aren’t “many” new projects coming to market, Mahoney said. Nor does he expect an influx of office space available for subletting to suddenly hit the market, which, combined with the pick-up in demand for larger office blocks, means that absorption net is expected to be positive this year after ending 2021 in the red, he said.
For most companies, back-to-office plans are gaining momentum, “especially in the C-suite,” Mahoney said. Additionally, employees who expect to work from home full-time may not be able to advance in their careers.
“Those of you who think you’re out by five days a week, you might as well be out by seven days a week,” he said.
After four decades in the business, Mahoney said he had achieved his career goals and didn’t have “many more mountains to climb.” He and his wife Kelly have a son and daughter at USC, where his son plays football and is majoring in property development, and a daughter who moved to New Zealand to work at an architectural firm after graduated from Cornell.
“One of the visions that came out of the pandemic was that I’m not ready to retire,” he said. “I’m definitely closer to the end of the game than the start of the game. Admittedly, I’m not going to do this for 15 years. It doesn’t happen.