Silicon Valley View Part 2

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July 25, 2016

By: Christian Basconcillo, Research Manager, JLL

Institutional capital’s pursuit of Class A assets in Silicon Valley continues unabated, but with rent growth likely to moderate in many markets over the next year, discussed in a recent Q2 report. Investors are becoming more sensitive to asset pricing for core product in prime submarkets.  Given recent high watermark deals for prime Class A assets in Palo Alto ($2,400/SF) and Mountain View ($1,400/SF) this is, perhaps, understandable.SV Stats

As sometimes happens at this point in the cycle, though, foreign capital is stepping up.  A growing cadre of overseas investors — notably from China, Korea and Europe – are parking their cash in Valley real estate.

This institutional investment urge is partly a reflection of the Valley’s ongoing global standing.  It is also being fueled by the presence of more foreign-based ventures and tech firms throughout the Valley. Chinese tech companies such as Baidu, Tencent, Alibaba and, most recently, consumer electronics firm LeEco have set up beach-head locations. Canadian financial services giant RBC has set up an “innovation lab.”

The Valley also has a robust support infrastructure for foreign start-ups and entrepreneurs.  Add to this, the fact that 58% of Valley STEM workers are foreign-born, and it’s easy to see why foreign capital is attracted to its companies as well as real estate assets.

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