Is Silicon Valley Real Estate Looking Up?

It’s no secret that the real estate industry took a real beating when the economy floundered and went under a year or so ago. But are there signs of change starting to show? Can we assume that this industry is now starting to look up and that prosperity is not too far away? When we take a look at the situation in Silicon Valley, we see that the closure of hundreds of organizations and the laying off of their workforce have led to a disaster in terms of commercial real estate. The information technology sector has lost the third most number of jobs in California in 2009, and unemployment is high in the Silicon Valley area what with Applied Materials, Sun Microsystems, HP, Cisco and Adobe Systems announcing more than 5000 layoffs since October last year.

This is not a situation that was expected or even planned for by the real estate industry. In fact, things were so hunky dory and info tech companies were making money like there was no tomorrow that developers felt confident enough to add more than 4 million sq. ft. of speculative office space in Silicon Valley since 2007 in the hope that start-ups would move to swankier surroundings once they had established themselves and made their money. But with the pendulum swinging the other way, it seems to be a time for foreclosures rather than new beginnings.

The rates of commercial foreclosure are already high, and the figures are expected to double in 2010. Research firm Real Capital Analytics estimates that this will amount to $1.5 billion in foreclosed properties, not a trifling sum by any means. And what’s worse, most of these properties have lost more than half their value. There doesn’t seem to be even a sliver of a silver lining on this cloud.

But the housing sector does seem to be looking up if reports from MDA DataQuick are to be believed, the median resale house price in Silicon Valley is up by 15 percent from December 2008. The market too is doing well with sales climbing by 69 percent. So while 2009 may not have been the best for the real estate industry, it does seem like the housing sector at least is looking up with people being able to afford mortgages once again.