SAN JOSE, FEBRUARY, 12, 2019 – Colliers International hosted more than 600 clients and colleagues at their 20th Annual Silicon Valley Real Estate Trends2019 Forecast on Tuesday, February 12th, at the California Theatre in Downtown San Jose. A broad mix of Silicon Valley commercial real estate professionals attended, drawn by their interest in discussing the most impactful trends affecting the market for 2019.
Colliers Managing Director and host Reed Payne, focused the thought-provoking afternoon “on the data,” in an effort to provide genuinely valuable insight to clients as they run their business in 2019 and beyond. Though the goal for the day was to unpack the current Silicon Valley market, Payne and his fellow speakers added an array of international and national details to the core market-specific considerations to offer a multi-faceted snapshot for 2019 and beyond.
Dr. Mark G. Dotzour—a highly-regarded and widely published real estate economist who spent 18 years as the Chief Economist at the Real Estate Center at Texas A&M University—gave an outstanding assessment of the current economic climate and its implications for commercial real estate going forward. Though unabashedly funny, Dotzour walked the audience through a data-driven evaluation of current economic indicators—including job data, wage growth, and low inflation—as well as historic patterns in order to make the case that the US economy is still robust, and that growth is still healthy even if slowing somewhat.
Dotzour sees no indication that economic conditions will head in a recessionary direction during 2019, or probably even 2020. He warned the audience not to let the scars from the 2008 financial crisis interfere with a dispassionate assessment of the current facts. (“That was not a recession; that was a financial apocalypse, the kind of thing that is seen once in a lifetime.”)
Of special interest to the tech-centric Silicon Valley audience, Dotzour commented on today’s monopolies á la Google, Facebook, and Amazon, by pointing out that capitalism as an economic system invariably trends towards unhealthy monopolization of various economic sectors. Offering over a century of examples, he predicted in regard to today’s tech giants that the federal government will “eventually have to go in and blow things up. That’s just the way it works.” In response to another question about the rising cost of materials in the construction sector, Dotzour predicted costs would even out, eliminating any serious drag on the sector’s growth.
To give clients an assessment of the political horizon and the ramifications for business and the economy, Colliers also invited Charles Cook Jr.—Editor and Publisher of highly regarded The Cook Political Report, and long-time contributor to both ABC World News and NBC Nightly News. Looking forward to the 2020 presidential election, Cook pointed out how unusually polarized and entrenched popular opinion is about President Trump. With thirty-five percent of electorate staunchly positive, and forty-five percent equally negative, Cook predicted that the 2020 election will come down to the president’s ability to sway the narrow twenty percent in between—a challenge given midterm election data that showed unprecedented Republican losses among moderate suburban voters. Cook gave Democrats good odds for taking the White House “as long as they can avoid nominating a nut.”
Colliers Managing Director and 36-year real estate veteran, Reed Payne, laid out Colliers perspective on the unfolding Silicon Valley market, based on the analysis of the Colliers research team led by Silicon Valley Research Manager, Lena Tutko, and detailed input from Colliers' 100-plus brokers. Guests received copies of the Colliers 2019 Silicon Valley Market Forecast Report, and Payne used his time at the podium to recap market results from 2018 and provide Colliers’ perspective on the immediate market looking forward.
Recapping 2018, Colliers reported for Office gross absorption of 12.2 million square feet; net absorption of positive 297,000 square feet; and availability at 10.9 percent, a drop despite the adding over 3 million square feet to the base during the year. In R&D, Colliers reported gross absorption of 10.5 million square feet; net absorption of positive 297,000 square feet; and availability at 9.2 percent. For the Industrial sector, Colliers reported gross absorption of 2.6 million square feet; net absorption of positive 414,000 square feet, and historically low availability of 2.9 percent. For Warehouse, Colliers reported gross absorption of 1.2 million square feet; net absorption of a very supply-constrained 155,000 square feet; and vacancy of 4.7%.
Looking forward to 2019 on the local level, Payne presented a strongly optimistic outlook for all sectors of Silicon Valley commercial real estate, a perspective heavily influenced first and foremost by the performance data coming out of Facebook, Google, Apple, and Microsoft’s LinkedIn. Additionally, Payne pointed to growth among midsized companies now reaching a more stable footing, as well as the data showing that half US venture capital investment dollars continues to land in the Bay Area. Drawing on analysis by outside experts such as Moody’s Analytics as well as Colliers’s own national team of economists and research specialists, Payne pointed out that all indications suggest that the Silicon Valley market entrepreneurial engine will continue robustly even in the face of various late-cycle headwinds.
Colliers was joined in underwriting this year’s Trends2019 presentation by its lead sponsor Hudson Pacific Properties, in addition to LMA Law, LLP, Heritage Bank of Commerce, Facilicorp, DWS, and McLarney Construction.
The Colliers 2019 Silicon Valley Market Forecast Report can be requested at the contact information below.
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For further information, please contact:
Lena Tutko, Research Manager | Silicon Valley
Research, Colliers International