The rapid growth of tech companies is creating a hot commercial real estate market in Silicon Valley
The rapid growth of tech companies is creating a hot CRE market in Silicon Valley

The national real estate market has been struggling for the last few years, but now things appear to be turning around.

Construction spending is rising like a phoenix, indicating higher demand for new buildings and low interest rates are attracting new investors. Improvements can be found in every sector of the industry, from residential to commercial. This is good news for landlords and property owners, as the high demand is helping to raise property values.

The CoStar Commercial Repeat Sales Indices showed record gains for the commercial real estate sector in 2012. The number of transactions was up 22 percent from the year before, marking the highest annual growth in eight years.

AGBeat reported that there was a spike in sales during December as owners looked to unload struggling properties before Congress enacted tax changes related to the fiscal cliff. However, the CoStar index demonstrated that distressed sales accounted for just 11.5 percent of purchases, the lowest level since 2008.

All of these figures are tidings of good news for building owners, as the numbers promise additional flexibility with capital in the future. As purchases increase, demand will push up sales price and property values. Owners could borrow from their additional equity to make improvements necessary to reduce costs, charge higher rents or seize on the ability to sell when the price is right.

Making Smarter Decisions

Property and Tenant Management Software helps owners and managers run their properties more effectively by capturing and reporting on every aspect of operational performance and the tenant experience. But these programs do much more than improve day-to-day operations. When the time comes to acquire or dispose of a property, this wealth of data provides a rich history of maintenance, tenant service and risk liability information that can inform and speed a sale.

Some real estate markets have shown signs that strong gains will continue for the next few years. Contra Costa Times stated that Silicon Valley is set to be a red hot market for commercial real estate for years.

“Silicon Valley is the hotbed for hardware, software and services that are being designed for mobile,” Tim Bajarin, principal analyst with Creative Strategies, told the source. “Silicon Valley is in one of its strongest growth periods. This could last another four or five years.”

A report by Colliers International stated that tech companies were seeking a total of 7 million square feet of office space. This high demand is driving up prices and creating record growth for communities surrounding San Jose. As properties become more expensive, companies are looking to alternative cities that provide the same access to regional talent and resources.