Sitting in San Francisco as I do, it’s easy to constantly get pulled into everything that happens in this 47 square miles of insanity, umm activity, within the commercial real estate market. Of course, there is a lot more going on in other pockets of Northern California beyond this tip of the Peninsula. Certainly one of the most active markets in the U.S. during this economic expansion has been Silicon Valley. I don’t think anyone is terribly surprised by this. It is home to some of the biggest and the fastest growing companies on the planet. San Francisco has managed to capture a lot of the flash recently – urban environment, taller and taller buildings, rezoning initiatives, transit (for better or worse), expanding big and small tech companies and on and on. And while I wouldn’t call what’s been happening down in Silicon Valley exactly sedate, it really hasn’t captured the imagination in the press as much.
What may come as a surprise, though, is that employment growth continues to kick it down in Silicon Valley while it has slowed in other parts of the Bay Area, most noticeably in San Francisco. One might say the reasons are that the market is at full employment and the labor force increase has weakened over the past couple of years from its early torrid pace. But it’s much the same story down in Silicon Valley. There’s been some ebb and flow but the latest data reflects a market that is pretty darn hot at the moment with total job growth at +3.2 percent from October 2017 through October 2018 (year-over-year) while office sector jobs are up +5.3 percent over the same time period. That overall job growth has increased from +2.6 percent and +2.3 percent over the previous two year-over-year periods as well. Of course much of the growth is most certainly related to office expansions at tech companies though it is occurring in almost every other sector as well. For instance, the office category obviously doesn’t include a somewhat special subset of computer & electronic product manufacturing positions which jumped +4.6 percent (+5,300) year-over-year for the San Jose MSA.
And in just reviewing our latest market reports for both office and R&D space, it’s easy to see why this job growth has been so strong. There are numerous big tech firms expanding across the area with leasing activity and net absorption knocking it out of the park this year. It’s absolutely true that these companies are all looking to also expand elsewhere – less expensive locations for both employers and employees being the key reason – yet with such a deep talent pool, the expansion in Silicon Valley goes on as well.
Since the end of the third quarter, in fact just within the past week, there has been additional news coming out of Silicon Valley. More development is coming to San Jose proper – in a mixed-use, transit-oriented format; a tech company doubling its workforce; and a new use for an older building in the heart of downtown. Interconnected is the fact that autonomous vehicles are nearing real use with much of the technology for them coming from the Bay Area with the bullseye being Silicon Valley (the number of autonomous vehicle related companies is approaching triple digits in the region). And then there’s the fact that many of the HQs of the big tech players are now becoming tourist attractions. Read on down below for much more on all of these topics.
Of course, there remains a lot of activity ongoing in San Francisco and other areas of Northern California too. The Central SoMa rezoning plan was finally approved this week with a mayoral signing upcoming. Stay tuned there. A couple of local companies are expanding/relocating out of San Francisco (though not abandoning ship here at all). And hopefully there will be more housing near transit.
By Robert Sammons, Senior Director, Northern California Research
This post is commentary from the latest weekly edition of our NorCal Newsline, which you can subscribe to for free by e-mailing firstname.lastname@example.org.
Robert Sammons is Cushman & Wakefield’s Senior Director, Northern California Research. Based in San Francisco, Robert’s principal roles include working closely with the C&W research teams across the Northwest – including Northern California, Portland and Denver. Robert is author of numerous documents that delve into a wide variety of real estate and economic trends. He has been a quoted source for all manner of real estate and related economic information in many widely known media outlets across the country. Robert has 29 years of real estate experience as both an appraiser and researcher. He earned a BBA in Real Estate from The University of Georgia and an MS in Real Estate from Georgia State University. Robert is a member of the Urban Land Institute.