Well into the seventh year of recovery from the Great Depression, more than any place in the nation Silicon Valley's recovery has been quite robust, according to Larry Stone. The single-family housing market has really "caught fire." Silicon Valley has had over six years of positive office leasing. Warehouse vacancy in Santa Clara County is at 0.9 percent, industrial vacancy at 1.3 percent, both the lowest since 1988. While the general outlook is positive, changing attitudes and major shifts in the economy are significant areas of concern.
Speaking to members of the Silicon Valley Association of Realtors, the Santa Clara County assessor said Silicon Valley's multi-family apartment market has enjoyed six years of strong performance, with apartment occupancy hovering at 97 percent. It has been reported that San Jose apartment rents have risen 45 percent in the past four years, with the average rent for a one-bedroom apartment in the metropolitan San Jose area at $2,600.
Although apartment rents are beginning to soften, Stone pointed out that long-term rents depend on incomes and income and wages in the region continue to rise and remain significantly higher than any place in the state and nation. Santa Clara County has the highest median household income in the nation, at $102,000.
Stone indicated the county has had seven consecutive years of job gains, reaching a 4.1 percent rate of growth, better than the Bay Area at 3.3 percent. Unemployment dropped to 3.5 percent and was lower than the state (5.2 percent) and nation (4.7 percent) at the end of last year.
Attitudes about homeownership are changing, according to the county assessor. In Silicon Valley millennials comprise 29 percent of the population and they are changing the marketplace for housing. Many millennials no longer believe homeownership is a component of the American dream. They are more mobile and can work and live anywhere. They prefer urban city living that offers a work-live-play lifestyle.
"Where they want to live is more important than the job they select," said Stone, adding that individuals under 30 are projected to form 20 million new households over the next 10 years, a majority of which will be rented.
"Older people believe that renting is throwing your money away. An increasing number of young people believe that owning is throwing your freedom away," said Stone.
Digital technology and online commerce are also changing the commercial landscape and marketplace because of a growing preference for online shopping and an "on demand" economy. Dozens of companies are moving back to the U.S. because labor costs in places like China have been increasing 15 to 20 percent per year. Fast shipment, next-day delivery, strategically located distribution centers have become essential.
Retail stores are folding and office space is getting smaller. High tech companies want open floor plans with fewer cubicles and offices because they believe more collaboration among employees promotes greater productivity.
Though still projecting positive growth for Silicon Valley's economy, Stone mentioned there are wild cards. There is dysfunction and gridlock in Washington, D.C., and federal fiscal and monetary policies, political chaos or a global economic meltdown could cause the U.S. economy "to spin out of control."
Stone reminded Realtors there are cycles in the economy. "Locally, we must be mindful of the fact that our cycles in Silicon Valley tend to be faster and steeper going up and coming down," said Stone.
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.
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