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Fri May 13, 2016, 09:44 AM May 2016

Silicon Valley Commercial Property Boom Ends, Totally Exposed to Big-5: Apple, Google, Facebook.....

Silicon Valley Commercial Property Boom Ends, Totally Exposed to Big-5: Apple, Google, Facebook, Amazon, LinkedIn
by Wolf Richter • May 12, 2016

[font color="blue"]This could get very ugly![/font]

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. ..................(more)


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