Santa Clara County assessor Larry Stone knows he has few fans, especially during property tax time. In fact, he expects to be greeted by boos when he makes a public appearance. This month, after the required boos from members of the Silicon Valley Association of REALTORS®, Stone delivered very positive news about Silicon Valley's real estate market. The market is booming, Stone said.
"We have emerged fully from the greatest economic downturn since the Great Depression," announced Stone. "We have risen from the depths of the bottom of the worst economic decline in my lifetime."
He shared statistics that point to the robust recovery in the region:
Apartments
Apartment vacancies declined and rents increased 10 percent in 2014. The apartment occupancy for Silicon Valley stands at 97 percent. Property values declined during the recession by as much as 60 percent in some areas, with condos and townhomes especially hard hit. Today, for-sale inventory is down.
"The foreclosure crisis is behind us," said Stone.
Office/R&D
Mountain View, Sunnyvale, Santa Clara and north San Jose have experienced significant office leasing activity. Stone reported Class A office rents increased 8.6 percent last year and R&D rents were up 10.3 percent. Office vacancy in Silicon Valley was at 9.4 percent at the end of 2014. There are 10.7 million square feet of office and R&D space under construction, and 73 percent of that space is already leased or will be occupied by an owner.
Warehouse and Industrial Space
Warehouse vacancy countywide is a modest 3 percent and 4 percent for industrial. U.S. manufacturing is experiencing a modest resurgence, "reshoring" back to the U.S., as labor costs in China are increasing.
Hospitality and Lodging Industry
Hotel occupancy in Silicon Valley increased 32 percent from 2009 to 2014. Average daily room rates jumped 50 percent, according to the Silicon Valley Business Journal.
Retail Sector
The retail sector has been slow to recover because it was overbuilt and faces competition from online sales, though these sales still represent only 9 percent of all retail sales.
Stone reminded REALTORS® it is his job to accurately assess property. He indicated Santa Clara County receives far fewer assessment appeals than any other major county in California because he responds proactively before the property owner files an assessment appeal.
Each year in June, Stone's office sends out assessment notices to 483,000 Santa Clara County property owners, notifying them of their assessed value before their tax bill is mailed in October. This way, if a property owner disagrees with the assessed value, they can request an informal review of their assessment.
"If we agree that the property is over-assessed, we'll lower the assessment before the tax bill is mailed. That saves all of us the time of correcting the tax bill, or adjusting revenue previously distributed to local agencies. We also avoid the more formal, contentious assessment appeal process," explained Stone.
Taxpayers can formally appeal that assessment. The appeal period starts July 2 and has a strict deadline of September 15 each year.
Stone said he normally receives 3,000 to 4,000 assessment appeals annually. Due to the drop in property values during the recession, his office received 12,000 assessment appeals in 2009; 10,000 in 2010; 9,500 in 2011; 7,800 in 2012; 5,400 in 2013; and 5,282 in 2014.
According to Stone, there are currently 6,492 active appeals in which the assessed value in dispute is $57 billion. Of that, $52 billion (91 percent) are commercial, industrial, and business property appeals. The total tax refund liability of these appeals exceeds $570 million.
"The assessment appeal process works. It's efficient and cost effective," said Stone.
With a robust economy and incomes rising rapidly, Stone projects Silicon Valley's real estate market will do well for some time. He did add one caveat: "One thing I do know is there are cycles in the housing market. Of this I am certain."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.