Categories





The Phaserl








TheLibertyMill


Just How Exposed Is Silicon Valley’s Real Estate Market to Apple, Google, Facebook, Amazon, and LinkedIn?

by Wolf Richter, Wolf Street:

This could get very ugly!

Apple shares have plunged 32% from June last year, and $282 billion in shareholder wealth has evaporated, on swooning sales and crummy data from suppliers. Today shares fell briefly below $90 for the first time since June 2014. But still, Apple’s market capitalization is about $507 billion. And Alphabet’s is $498 billion.

Along with Facebook, Amazon, and LinkedIn, they constitute the Big Five in Silicon Valley, with a giant footprint on commercial real estate that continues to grow. So just how exposed is Silicon Valley’s office market to a slowdown among the Big Five?

Already, there are cracks in the foundation. According to the Q1 report by commercial real estate services firm Savills Studley, overall asking rent rose by 7.1% year-over-year, and vacant availability edged down to 7.6%. But deal volume for the past four quarters plunged 14% year-over-year to 7.5 million square feet (msf).

Apple shares have plunged 32% from June last year, and $282 billion in shareholder wealth has evaporated, on swooning sales and crummy data from suppliers. Today shares fell briefly below $90 for the first time since June 2014. But still, Apple’s market capitalization is about $507 billion. And Alphabet’s is $498 billion.

Along with Facebook, Amazon, and LinkedIn, they constitute the Big Five in Silicon Valley, with a giant footprint on commercial real estate that continues to grow. So just how exposed is Silicon Valley’s office market to a slowdown among the Big Five?

Already, there are cracks in the foundation. According to the Q1 report by commercial real estate services firm Savills Studley, overall asking rent rose by 7.1% year-over-year, and vacant availability edged down to 7.6%. But deal volume for the past four quarters plunged 14% year-over-year to 7.5 million square feet (msf).

“Overall, this signals a shift to a more subdued market,” the report explained. Yet the big tech companies were still in an “unrelenting pursuit of talent and office properties” despite “growing concern about the challenging conditions for start-ups and a weak IPO market.”

But compared to San Francisco, leasing fundamentals “have not contracted as sharply.” Because in San Francisco, all heck is threatening to break loose.

In Silicon Valley, it comes down to the big tech companies. And that 7.5 msf leased over the past four quarters doesn’t include the slew of purchases by Google, Microsoft, and Facebook.

The red flag in the office market is sublet space. Companies that have big ideas about growth, and that perceive an office shortage, will lease more space than needed and warehouse that space until needed. But when the market turns for them, and they’re under pressure to cut costs, they’ll trim their headcount and put the vacant office space on the sublet market. This supply that materializes overnight creates a glut, and lease rates begin to swoon.

While sublet supply in San Francisco “has soared to its highest mark since 2010,” according to Savills Studley, it’s still more subdued in Silicon Valley. It is being watched nervously, after the beating that startup valuations have been taking, the “down rounds” of funding, the shut-downs, and even bankruptcies.

Read More @ WolfStreet.com

Help us spread the ANTIDOTE to corporate propaganda.

Please follow SGT Report on Twitter & help share the message.

1 comment to Just How Exposed Is Silicon Valley’s Real Estate Market to Apple, Google, Facebook, Amazon, and LinkedIn?

  • Craig Escaped Detroit

    Google’s parent “holding” company “ALPHABET” (as in “Alphabet Agency”, such as NSA, CIA, etc).

    Can’t be any more clear than that.

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>