San Francisco Real Estate Bubble?

by Alina Aeby.

San Francisco's economy seems to be doing better than ever. In the last few years the city has become the nation's start-up capital. There is a cluster of technology companies,  which chose to stay and grow in the city, like never before.

Not only this trend has pushed office leasing to record levels, but it also sent San Francisco residential real estate prices soaring and driven the apartment rents to levels not seen since the dot-com era.

The restaurants are packed, SOMA real estate is being reshaped and getting hipper as we speak and the city's politicians are willing to cut deals with the tech sectors in order to bring in new jobs  and development.

Some say this is a true renaissance of the tech industry, while critics are afraid of a new and painful bubble.

There are some true facts to attest to the city's economic prosperity.

According to the National Venture Capital Association data, the 415 area code, which is represented by San Francisco and Marin counties soaked up $3 billion of the venture capital investment in 2011. That amount exceeded the investments in South Bay, but trailed the Peninsula.

In the last 3 years, the city has had the highest number of job listings at start-up companies in the region. That is almost 40% of the Bay Area total start-up jobs, per  StartUpHire, a jobs site.

In February 2012, San Francisco registered the third lowest unemployment rate in the state and in the Bay Area. The 8% rate paced San Francisco immediately after Marin and San Mateo counties.

Apartment rents went up by 14% in the last year alone, which convinced some developers to start the construction of 3,000 new rental apartments. According to RealFacts, the average rent for 1 bedroom apartment was $2,330 in 2011, up from 2,010 in 2009.

It seems like finally San Francisco is stealing the technology spotlight from Silicon Valley and the Peninsula. This is a dramatic shift, as a lot of companies and their employees see the benefits of being in a urban cultural environment and also prefer to trade a long commute to a short ride using the public transportation.

This is not the first time when the city is getting a technology adrenaline rush. It happened before in the roaring '90's, also known as the dot-com era. It ended with a big bubble in 1999-2001.

Is this a similar pattern? Some insiders say that although there are similarities, things are much different this time around. For one thing the Internet is much larger, having more than 2 billion users. A lot of products and services, especially the mobile devices and social media technologies and services were invented not long ago. The biggest difference is the real revenue these companies have, unlike the over inflated paper stocks of the dot-com companies.

The hiring process is much more cautious too.

After all, the market is cyclical and bubbles and economic downturns are almost impossible to stop. Meanwhile, San Francisco is enjoying another technology 'Golden Age', which we all hope that is spreads around.

Source: San Francisco Business Times