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Google comes to San Jose

According to a recent analysis by McKinsey & Co., if the 9 county San Francisco Bay Area were an independent country, it would be the 19th largest economy in the world, with a GDP of almost $750 Billion. Just for reference, that would put it above countries like Switzerland & Saudi Arabia but just below Turkey & Mexico.

Of course, the tech industry is a major driver of the Bay Area economic engine and when a gigantic player like Google comes calling into a town like San Jose, the economic & political ripples are bound to be significant as well (think affordable housing, traffic gridlock and homelessness etc).

From a real estate point of view, the key question that is on everyone’s mind is what will the impact of Google be as it comes into San Jose? Will the real estate prices go up, go down or stay flat? Is it still a good time to buy? Recently a handful of us had a chance to sit down with San Jose City Councilor Devora Davis(District 6) to better understand what is going on with Google and here is a summary of what the Councilor shared with us.

What

  • Google has already purchased 50 of the 250 available acres of land in San Jose, including both public and private land. There is apparently no more public property left to purchase.
  • This will add roughly 8 Million square feet of office space, adding 20,000 workers to its San Jose campus.
  • San Jose currently has a lot fewer jobs per resident than the surrounding cities like Santa Clara or Mountain View. It needs 270,000 jobs to achieve 1:1 resident: employment ratio. Google’s promised 20k jobs can make a non-trivial dent in that objective.
  • It is interesting to note that 21 acres of prime downtown real estate now purchased by Google were once bought and set aside by San Jose to build a new ballpark for the Oakland A’s.
  • The proposed plan envisages that Google will not build an Apple-like insular complex, but rather a cluster of buildings spread throughout the Diridon area, connected to each other with walking paths and modern transit options

When

  • Ground breaking is planned for 2022, with the first phase fully operational some time in 2026/2027, to align with BART coming to San Jose. Bear in mind this is a transit-oriented initiative, which is why the land parcels are being purchased around San Jose Diridon Station.
  • The current phase, which started in 2018, is focused on working with the City, developing the overall concept and in enabling the actual sale of land. The next phase will focus on the specific nitty-grittys of how many buildings, how much green space, walkability etc.

What does that mean

For Prospective Homeowners: If you are planning to buy a home in the adjoining areas e.g. Willow Glen or the Rose Garden, this is a great time to do so. When an educated, innovation-centric hub sprouts in your backyard, the long-term implications are typically very positive. Look at what is happening in Sunnyvale, Mountain View or even Danville (East Bay), and you will see the positive impact on real estate prices from a mid-long term horizon.

For Current Homeowners: If you already own a home, the best thing to consider would be to add an Accessory Dwelling Unit (ADU) for which San Jose recently simplified the regulations and the permitting procedures, so you can get same-day permits. Renting this out would be one way to generate an additional income stream while still staying in your own home.

For Investors: The housing needs of a 20,000 strong workforce can be quite profound indeed. While San Jose has just raised the height limits on buildings by 70 ft (to allow for more vertical, dense growth), not everyone will want to live in the downtown core. In my opinion, the potential for seeing strong rental growth remains high, especially since companies like Google bring their own ecosystem along as well (think of the partners, the service providers, the various agencies that do the work that Google would outsource).

Next Steps

  • If you want to better understand why San Jose would be a great City to buy a house now, pls contact me at sheila@rwcastlerock.com.
  • If you are looking for general updates on the Google move, pls visit diridonsj.org

Thank your for your time in reading this blog.

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