Longtime Bay Area residents concerned about the tech boom driving up real estate and rental costs often wonder: When will this bubble burst?
Here’s an answer that will bum them out: Never.
Yes, some startups are likely overvalued. And there’s bound to be a unicorn reckoning. But in terms of what’s transforming the Bay Area, the issue is really the massive hiring boom being driven by some of the region’s biggest names: Apple, Google, Facebook, et al.
In this regard, the news that Google and LinkedIn have agreed to a massive real estate swap is a big deal. As reported by the Silicon Valley Business Journal, the two companies have agreed to exchange properties in Mountain View and Sunnyvale that include 1 million square feet of buildings and another 2.4 million square feet of potential office development space.
Okay, so what?
While the transaction includes numerous parcels, and is a bit complicated, the Journal lays out the bottom line nicely: The deal lets both companies accelerate plans to build the giant, futuristic campuses they want but that have thus far been delayed by their fight for land.
The deal, in turn, will allow them to eventually stuff thousands more employees into their Silicon Valley offices. This would be fine, except that when you add in Apple’s and Facebook’s big new offices, the gigantic campuses being constructed seem to continue to outpace the building of any new housing.
And you don’t need an economics degree to know that this is going to mean even more competition for existing houses and apartments. Followed by increased housing prices and rental rates.
What’s more, these giants are making huge, long-term commitments to their hiring plans by spending heavily on these dream campuses. So whether the stock market is up, down, or sideways, expect these companies to keep building and hiring.
And, in the meantime, don’t hold your breathe waiting for the current real estate madness to ebb. This is not a bubble. It’s the new normal.
