Any doubt that a certain kind of sparkle has gone off the technology industry was laid to rest for me on a recent visit to Silicon Valley.
Last month, while driving down Sand Hill Road in Menlo Park - the famed, oak-lined avenue of the kingpin venture capitalists - I noticed a sign advertising office space to let. On Sand Hill Road! In recent years, such a sight in this most exclusive of enclaves would have been as impossible to imagine as Oracle's playboyish chief executive, Larry Ellison, entering a monastery.
Apparently, vacancies on Sand Hill are hovering around 10 per cent after having had no turnover whatsoever in 2000. The price per square foot of office space, once a hefty $17 (€18.56), has dropped below $11 in some cases - although some companies that came into the neighbourhood in the early 1990s at $5 per square foot made neat profits for years by subletting.
What's extraordinary is not so much that vacancy rates have reached levels not seen since the early 1990s, when most of Sand Hill's low-slung office buildings, nestled back in the rolling Stanford hills, were taken by publishers. That's shocking enough for those who knew the road more recently as the arrogant ground zero of venture capital, where khaki-trousered VCs in open-necked shirts had long surpassed, in economic power and might, the suited, patrician bankers of the east coast.
But I was astonished that space was not simply being re-let discreetly through local property brokers. Instead, "for let" signs dotted the frontage of the buildings. How the mighty have fallen.
The continuing slump is hammering property prices all around the Bay Area. In the second quarter, 13 per cent of property lay vacant - compared to 2 per cent last year - and undoubtedly that figure has risen again in the past couple of months.
The speed of change is also shocking, nearly doubling between the first and second quarters. Breaking the figures down into the two main counties that comprise Silicon Valley, Santa Clara County vacancies climbed to 10.3 per cent from 2.1 per cent, while San Mateo County vacancies stood at 17.1 per cent - up from 1.6 per cent last year.
Another expression of how closely the vacancy rate is connected to the dotcom crash and overall technology slump is the fact that some 36 per cent of vacant space in the Bay Area is available for sublease. That's an unusually high figure according to commercial estate agents, and signals that companies aren't just reaching the end of their leases and moving on, but are instead trying to recoup some cash from longer-term leases signed with high hopes in better times.
Of course, given the area's painfully expensive rental rates, few fail to see at least some silver lining in this grim cloud. Rents have dropped on average 39 per cent over the same period last year. That allows companies which are feeling the pinch, but surviving, to move to swankier digs or take more space, while start-ups awaiting the inevitable upturn can sign favourable lease terms and move into very pleasant offices indeed.
This is particularly true in the dotcom regions of San Francisco, where many a 19th-century brick warehouse or sweatshop was converted into a groovy high-tech palace. Rents for houses and apartments are also dropping, taking some of the squeeze out of living in this beautiful area.
However, people still routinely spend half their take-home pay on rent or a mortgage, especially in San Francisco itself.
The last time rents were cheap on the Victorian-lined hills of "The City" was the late 1960s and early 1970s - great for those ageing hippies who got rent protection in 1974, perhaps, but brutal for everyone else.
Only those "paper millionaires" who bought in the 1950s, 1960s or 1970s and are now sitting on mortgage-less houses in the Bay Area worth a cool million or two can relax. My parents fall into this category, but they recall that prices for homes in what was then the very sleepy town of Palo Alto were very high even in 1961, compared to the American mid-west.
To give some perspective on this before you complain about Dublin rents and house prices, consider that a decade ago I was renting a one-bedroom flat in San Francisco from kind landlords for nearly £800 a month. At the time, this would have been considered unusually reasonable for that part of the city. Now, the same place goes for a figure approaching £3,000 per month. Ouch!
Unsurprisingly, then, many who went to Silicon Valley in search of luck or riches or just for the dotcom crack are now moving away, since the tech cash spigot has been turned off.
Good friends with established careers in the region tell me they are thinking of North Dakota or New Mexico or Virginia - somewhere that you can still buy a house and raise a family without risking bankruptcy. Some Europeans are pondering a move back to their countries of origin.
But leaving the Bay Area is hard. It lies near the beaches and is a reasonable drive from Lake Tahoe and the ski resorts that dot the massive mountain range stretching the length of the state.
The days are mostly balmy and sunny, and winter is ridiculously brief. There's plenty to do and few cities in the world are as breathtakingly beautiful as San Francisco, embracing the bay, as it does, with its shimmering bridges.
I know; I chose to leave many years ago and, short of some fabulous share option scheme that nets me my own tech millions, returning there would be back-breakingly expensive.
On the other hand, I live in an endlessly intriguing and lovely country, and many American friends envy the pleasure I get from being here.
Anyway, one can always travel for needed sun breaks and I get plenty of opportunity to get back to California. The cost of living may be increasingly painful here too but at least there's still a lot more financial breathing space than in Silicon Valley - and there's always the persuasive argument of Guinness.
klillington@irish-times.ie
