According to a recent article from The Mercury News, the Bay Area is expected to open 18.2 million square feet of office space this year alone== more than New York City and Dallas combined. Interestingly, though, home, condo, and apartment building in the Bay Area has not experienced the same rapid growth.
As the article speculates, the disproportionate growth in Bay Area jobs and housing is likely to create even more competition for the already limited supply of homes in the region.
CEO of the business-backed Silicon Valley Leadership Group, Carl Guardino, was quoted in the article saying, “It’s encouraging that so many respected employers are investing in Bay Area jobs and immigration growth… but we all recognize that jobs need a place to go home and sleep at night.”
Evidently, between 2010 and 2015, the region created six times as many jobs as housing units, based on a study by the leadership group and the Silicon Valley Community Foundation. As a result of the increased housing pressure, lower-income workers have been forced out of the region at much faster rates than high-income workers, while job openings continue to go unfilled.
A survey from real estate data company Yardi Matrix indicates that the whirlwind of commercial development has been led by major office openings in the South Bay. Some of the biggest projects this year included the official, complete opening of the 2.9 million square foot Apple Park in Cupertino, Park Tower at Transbay, The Exchange on 16th in San Francisco, totaling 1.5 million square feet, and Facebook’s 500,000 square foot MPK 21 campus, designed by Frank Gehry in Menlo Park.
Additional major developments include the Voyager property in Santa Clara, Microsoft and Google projects in Mountain View, the Stoneridge Mall Road project in Pleasanton, and Moffett Towers in Sunnyvale, according to the same source.
Yardi Matrix also estimates that commercial openings in Santa Clara County have increased by 6.5% YoY, while the San Francisco and Oakland metro has experienced a threefold increase in commercial space during the same period.
At the same time, while housing starts have been strong in the East Bay and San Francisco, growth has started to slow down on the Peninsula. Local governments in Santa Clara County issued permits for just 5,500 housing units through August, an 8.5% decrease from the same period last year, according to Sacramento-based Construction Industry Research Board.
Planners and analysts believe residential building has not been strong enough lately to make up for the new housing deficit that’s been ongoing over the last several decades.
Steve Levy, director of the Center for Continuing Study of the California Economy in Palo Alto, was also quoted in the article, saying, “If you keep pace in 2018, it doesn’t do anything to work off the backlog… We need a lot more to work off the backlog.”
Levy also feels the Bay Area recently has improved its mix of housing and commercial development. He pointed out that major projects in Santa Clara County, such as North Bay Shore in Mountain View and Vallco Mall in Cupertino, are estimated to bring thousands of new homes, condos, and apartments.
According to Robert Dietz, chief economist at the National Association of Home Builders, some of the leading factors contributing to the Bay Area’s slowing residential growth include high costs for land and labor, in addition to nationwide increases in construction materials, particularly Canadian lumber.
As Dietz pointed out, the influx in Bay Area office development also prevents construction workers from taking on residential projects. Not to mention, as housing costs increase, it becomes more difficult to recruit skilled laborers.
According to polls, high housing costs remain among the Bay Area residents’ top concerns. As Dietz says, “How do you build that starter home? You’re just going to chase your younger generation away.”
(Read the full article on The Mercury News.)
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