Pending IPOs Spark Confidence

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By Michael Repka

Although the end of 2018 and early 2019 revealed material weakness in the Silicon Valley real estate market, there is some reason for optimism. Recently completed IPOs, coupled with expected upcoming IPOs, seem to be breathing a sigh of relief in the real estate market.

However, unlike blockbuster IPOs by Facebook, Google, LinkedIn, and a myriad of other local companies, the upcoming IPOs are, by and large, based outside of Silicon Valley.

Lyft headquarters is in the China Basin District of San Francisco. Uber’s is on the outskirts of the SOMA District of San Francisco but they have a relatively large presence in Palo Alto as well. Pinterest and Airbnb are in the SOMA District of San Francisco. Levi Strauss is in the North Beach District of San Francisco while Slack and Postmates are in the South Beach District. None of these headquarters are a quick drive away, but their proximity does affect Silicon Valley real estate.

We do not expect to see a rush on local real estate as much as that near the headquarters of these companies. Nevertheless, the multitude and success of these IPOs can still have a positive impact on the psyche of the Silicon Valley buyer pool.

Firstly, the success of local tech companies, even if based outside of the immediate area, reminds everyone of the incredible business environment and opportunity in the Bay Area.

Secondly, many of the executives who work at these companies, or those who are likely to be hired after the infusion of cash, may prefer to live in Silicon Valley because of its warmer and more pleasant weather and its highly-ranked schools.

Finally, a significant portion of these firms is owned by venture capitalists and other investors in and around Silicon Valley.

It is difficult to ascertain exactly what is sparking the revitalized buyer interest, but the combination of lower interest rates (when compared to last fall), the improving spring weather, and excitement about the IPOs, seems to have given the Silicon Valley real estate market a much-needed boost.