1 July 2019
As in Sydney, one of San Francisco’s major urban issues is housing availability. But why would this be of interest to commercial agents?
Well, one of the major reasons for the city’s residential affordability crisis is because it’s home to tech titans, Google and Apple.
Google’s recent announcement that it will invest $1 billion towards the development of 15,000 new homes in the San Francisco Bay Area will, no doubt, alleviate some of the housing pressure. But – as one of the largest employers in the area – surely the pledge will also benefit Google?
Google commenced operations in the Bay Area over 20 years ago. Since then, the rise of tech hubs – such as Silicon Valley – has contributed to the major increase in property prices.
“Forget the influence of co-working companies and the constant media attention on unicorns (privately held start-ups valued at over $1 billion), because everything pales when compared to the impact of the tech titans – Google and Apple – in San Francisco,” says Kymbal Dunne, Director of Client Solutions at Knight Frank Australia.
In Silicon Valley, Google occupies 265 buildings with a total net lettable area of 1.61 million m2. Apple has 145 buildings with a net lettable area of 1.16 million m2.
“Collectively, and after adding their office space in San Francisco city, these two companies occupy almost three million m2 in the Bay Area alone,” says Dunne. “That’s the equivalent of 60 per cent of Sydney’s CBD.”
However, Dunne says you could be forgiven for not knowing this.
“These companies are hiding in plain sight in a city where signage is scorned,” he says. “To my knowledge, few realtors in San Francisco even know what signs to look for.”
Dunne says he’s fortunate to have the local market knowledge and eagle-eye attention of his colleagues in the Bay Area.
“My colleagues have mapped the occupied buildings and shown me the impact of these two businesses in Silicon Valley and San Francisco city.
“The real estate play by two of the FAANGs (Facebook, Apple, Amazon, Netflix and Google) is akin to building the armies in the hugely successful HBO series, Game of Thrones. I say this because these businesses dominate areas like Menlo Park, Mountain View and Cupertino, often employing up to 40 per cent of all workers in those areas. These are kingdoms of titans.”
Given Google started in San Francisco with just 18,594 m2, the tech titan has now amassed a massive real estate holding in America’s North West. And all signs point to this only increasing over the next decade as they continue to grow and buy.
Over the next decade Google plans to repurpose $750 million of its office and commercial space to residential land.
“The two major issues in San Francisco continue to be housing shortage and housing affordability, which, in part, is driven by the rise tech hubs,” says Dunne.
“Google can employ staff, but staff can’t find anywhere to live. It’s too expensive. San Francisco is a great place to live and work, but the median house price in Palo Alto (home to Googleplex, Tesla and Hewlett Packard) is $3 million. Even for a young person starting out at Google, everything is out of reach.”
Dunne says housing affordability is a serious issue, with stories of employees living in their cars and the number of people experiencing homelessness growing daily.
So while Google’s pledge to support affordable housing supply in San Francisco is admirable, Dunne says more affordable housing will open up more job opportunities, further contributing to Google’s commercial foothold in the area and beyond.
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