California’s Silicon Valley Economic Outlook is Encouraging;
Market Ready for Home Building
The Silicon Valley housing market is becoming a bright spot for California, which continues to suffer from high unemployment and foreclosures.
National media outlets have recently highlighted the improving market. Bloomberg reports home prices in Palo Alto jumped 20 percent in May from a year earlier, the biggest jump since 2008 and climbed 3.1 percent in Mountain View, the ninth time in the past twelve months prices have risen year-over year. The Wall Street Journal takes note of a dearth of Silicon Valley properties for sale, which is often a precursor to rising home values.
Three trends are taking shape in the Valley that will benefit the housing market in this area.
For those currently employed, incomes are on the rise. This increase in wealth occurs on multiple fronts: salaries, bonuses and early disposition of stock holdings. In 2010, Google started the salary and bonus trend by giving its employees a $1,000 bonus and a 10 percent raise. Other companies have followed suit in an effort to keep their star performers from being poached. As a result, salaries for technology jobs in Silicon Valley were the highest in the country as raises outpaced the national average. In addition, many employees (and former employees) of private companies such as Facebook and Twitter are becoming instant millionaires by exercising their options and selling their stock in private secondary markets.
Prospects are growing fast for highly-skilled workers who are currently unemployed as big players including Facebook and Google expand and medium-sized companies advertise a steady stream of job openings. For example, Google just leased 715,500 square feet of space at the Technology Corners Office Complex, near the Eastern border of Moffett Field. This deal brings the total new space Google has committed to in Mountain View and Sunnyvale this year to 1.9 million square feet. Also, Google recently stated that it plans to add as many as 6,000 new jobs in 2011.
Demand is especially strong for highly-skilled workers such as engineers and computer programmers who command above median wages. Anecdotally, Linkedin nearly doubled its workforce by hiring 500 workers. Google will be hiring an additional 6,000 workers in 2011, primarily in the Silicon Valley (Sunnyvale, Mountain View and the Peninsula).
For lower-skilled workers who are currently unemployed their opportunities are just around the corner.
Facebook has leased a new 57-acre campus in Menlo Park that could house 9,400 workers by 2016. Apple plans to build a spaceship-shaped building on a new campus in Cupertino that could accommodate as many as 12,000. Twitter is moving into a nearly vacant 805,000-square-foot building in San Francisco and plans to increase its workforce from about 400 to as many as 3,000 by 2013. Google has agreed to pay Mountain View $30 million to lease 9.4 acres near Shoreline Boulevard, where the company is planning a cutting-edge, environmentally friendly office.
This surge in wealth is having a very positive impact on the Silicon Valley real estate market, especially in such areas as Palo Alto and Atherton. As the trend grows this will spill into other areas as newly rich workers bid up home values in suburban cities south of San Francisco.
The Bay Area tech hotbed has not yet fully escaped the grips of the recession. Silicon Valley still has a 10.6 percent unemployment rate — higher than last month’s national average of 8.8 percent. However, the valley created 1,200 jobs last month, and its biggest companies are on track to add thousands more in 2011.
By Jason Kliewer of Trumark Homes