For pricey real estate and offices, I think it comes back to the restrictive zoning policies in SV and SF. Ideally, developers would build very dense buildings next to public transportation, but this is more a dream than the reality here.
I think a big part of it is also the cyclical nature of demand. You know that big apartment development in sunnyvale near murphy st? it started before the big real-estate crash... then sat there, skeleton-like, for several years. It's done now, of course, and more are on the way.
I mean, I'm sure zoning difficulties are part of it... but the dramatic increases and decreases in demand have also got to have something to do with it. The business cycle here is shorter than your typical amortization schedule for a building. And yes, that isn't going to stop anyone from building on the upswing (if you structure it right, bankruptcy laws being what they are, you have a limited downside, and not much limit on the upside) - but when the cycle isn't "up" - people just stop building.