Silicon Valley Commercial Property Fundamentals Hold Strong
As anticipated, Silicon Valley commercial real estate activity decelerated in the first quarter of 2019. The slowdown was expected, given the number of massive deals signed in Q4 2018, clearing the market of prime available space. According to California’s Employment Development Department (EDD), the unemployment rate in Santa Clara County rose slightly quarter over quarter to 2.8 percent, however, remains below the year ago estimate of 3.0 percent and below the state average of 4.2 percent. The technology sector is continuing to fuel the economy – in February alone, technology companies added 2,700 jobs in Santa Clara County.
According to PitchBook data, venture capital (VC) funding remained resilient in Q1 2019 with $11.9 billion invested in VC-backed companies. However, similar to the commercial property market figures, Q1 2019 funding totals were over-shadowed by an anomalous fourth quarter, which encompassed the largest venture capital deal of all time with $12.8 billion inhaled by Juul’s vaping business. VC funding is an important metric to indicate the health of the economy and often a precursor to commercial real estate activity. Similarly, amplified funding often correlates to job creation and commercial expansion as beneficiaries need to scale operations.
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