Q2 2012 San Jose, California Commercial Real Estate Economy

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Q2 2012 San Jose, California Commercial Real Estate Economy

As it has in the past, strong growth in Silicon Valley’s enormous high technology sector is again leading the region in economic recovery and in the recovery of local real estate markets. Indeed, job growth numbers resemble those seen commonly during strong expansion periods, a claim that very few of the nation’s economies can make given the general sluggishness of the national recovery. According to preliminary data as of August provided by the U.S. Bureau of Labor Statistics (BLS), non-farm employment in the local Metropolitan Statistical Area (MSA), consisting solely of Santa Clara County, CA, was up fully 29,600 jobs (3.4%) from 12 months earlier and was up 53,400 jobs (6.3%) over 24. With much of the losses due to the recession redeemed, employment per the latest estimates for August was down just 15,700 jobs (1.7%) from the pre-recession August 2008 high. Recent expansion by information, telecommunications, social media, and e-commerce entities such as Yahoo!, Apple, Google, Facebook, Amazon.com, and others, which continue to advance technology on an international basis (indeed, they are transforming the world), continue to drive local economic and real estate expansion. (As cited in this report, massive campuses to include more than 6.0 million square feet combined are in the works for Apple and Yahoo!.)

BLS data show recovery spreading across a number of major private industry sectors. Employment in the local Information sector as of August was up 3,700 jobs (7.4%) from 12 months prior, according to preliminary estimates. The increase in Professional and Business Services employment over the same time span was 7,000 jobs (4.1%). Manufacturing, with its large high-tech component, saw a gain of 1,800 jobs (1.1%) year-over-year. Indeed, even the small, recently contracting Construction sector has seen the return of growth: employment therein per preliminary data for August was up 3,900 jobs (12.2%) from August 2011. In a related trend, moreover, the strong growth underway at major Silicon Valley tech firms is drawing new residents to the region. Along these lines, residential building permitting totals, while seldom high in volume given high barriers to entry, have increased dramatically. According to the U.S. Bureau of the Census, 3,322 residential units were authorized for construction during the first seven months of the year, a near four-fold increase from the total recorded for the comparable time span of 2011. Of the latest total, 910 permits were for detached single-family homes, a year-over-year gain of 56.6%.

Following reported increases in home sales volume, a recent slowdown is indicated. According to MLSListings Inc. as cited by the Silicon Valley/San Jose Business Journal in August, sales in the greater Silicon Valley area (as defined by this source) declined in July for the second consecutive month. For Santa Clara County alone, the decline from June to July was 6%. More positively, however, year-over-year sales in the county were up 15% and county inventory on the market was down fully 39% since December. In addition, prices have increased. The July median sales price for Santa Clara County transactions was $695,000, up 13% year-over-year.