Silicon Valley CRE Market Report & Forecast 2012-2013
I rarely cover markets outside of Texas on the Tenant Advisor, but the one exception is Silicon Valley. My Colliers colleagues in Northern California are outstanding professionals to work with and we all watch what is happening in the “Valley CRE Market” with keen interest, plus their market reports are “best in class.”
Caution was the story of 2012. Forward progress was made, but it seemed to come only when the outcome was certain and the ground was solid. There are many things in our economy that provide hope: a recovering real estate sector, companies’ record profits and profit margins, a cleaner credit market, and even consumer demand for big-ticket items, like cars, that they have held off purchasing for the past several years. Maybe even more promising is that the slow growth we did experience in 2012 appears to be real and lasting. Concerning that growth, Ian Shepherdson, chief economist at Pantheon Macroeconomics, says, “Underneath all the shenanigans in Washington, there’s a lot of strengthening.”
Still, the outlook is more optimistic in Silicon Valley. Being home to consumers earning the highest wages in the country, a housing market that has turned the corner and those companies with record profits, it looks as if the recovery is faster and stability closer. However, the past year still left many feeling unsatisfied.
What’s the catch? After the financial collapse brought on by the housing market and, locally, the burst of the tech-bubble in the not-too-distant past, businesses and consumers are looking further into the future for sustainable growth. Unfortunately, the uncertain outcome of negotiations in Washington over current and future fiscal policy, along with the continuing European debt crisis, is not allowing them to see very far. According to the Conference Board’s Consumer Confidence Index, consumers have an increasingly upbeat outlook on the current business and labor market conditions, but are becoming more negative about the overall short-term outlook of the economy.