San Francisco And The Bay Area

San Francisco and the Bay Area
 
Outlook

18 April 2016, by Paul Tostevin

We anticipate further, but lower level, price growth in the near term

 

■ Prospects for prices

Given the outperformance of prime rental markets, it would appear that capital values in the Bay Area may yet have further to run. Low levels of inventory coupled with a strong demand will support further price growth. With affordability increasingly squeezed, however, we expect to see lower levels of growth to that seen in the last four years.

■ The price of world city status

World cities can become a victim of their own success when accommodation costs rise to the point where affordability becomes an issue. The challenge for San Francisco and the Bay Area is in supplying new business quarters and residential neighborhoods while capturing the characteristics that made it so attractive in the first place. The regeneration, renewal and gentrification of Oakland is likely to play a large part in the future of San Francisco as a successful urban area.

■ Infrastructure implications

A new high speed rail line will connect Los Angeles with San Francisco in 2 hours and 40 minutes. The first stretch, from San Jose to Bakersfield, is scheduled to open in 2025 and may open up new parts of California to a Bay Area commute. Conversely, it may encourage the spread of San Francisco and Silicon Valley firms to new, cheaper cities further down the line.

■ Slowing tech rally

Start-up valuations are down and sector salary expectations are reaching a tipping point. Some tech firms are already making savings. Lyft, for example is setting up its engineering hub in Seattle and moving customer support functions to Nashville. An exodus seems unlikely, however, thanks to the Bay Area’s global reputation and established industry infrastructure. Any slowdown may also be offset by growth in other sectors, notably life sciences.

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Key Contacts

Paul Tostevin

Paul Tostevin

Associate Director
World Research

Savills Margaret Street

+44 (0) 20 7016 3883

 

Yolande Barnes

Yolande Barnes

Director
World Research

Savills Margaret Street

+44 (0) 20 7409 8899

 

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