Value of real estate poised to increase as Los Angeles emerges as the next Silicon Valley

Over the past three years, Los Angeles has established the necessary foundation to become the next hub for technology innovation, bypassing Silicon Valley as a dominant region for technology-based startups. Forbes reports that in 2012, more venture capital investments have been made in Los Angeles than in any region aside from Silicon Valley. LA and New England have been competing for the position as runner-up to Silicon Valley for the past two decades, but southern California has emerged as the most promising region for the technology sector. Structural advantages enjoyed by the Los Angeles region have contributed to its position as a growing incubator for small businesses.

Startup activity is known for boosting the local economy, and may add value to real estate in Los Angeles in both commercial and residential markets. GigaOM reported that recent startup activity in San Francisco impacted the residential rental market, with annual rents up by $5,000 since January 2011. As a result, affordable apartments are increasingly difficult to find and rents and home prices continue to rise.

A recent study conducted by the Kauffman Foundation measuring levels of new business creation across the United States reported that Los Angeles had the highest rate of entrepreneurial activity between the years of 2009 and 2011. Venture capitalists in Los Angeles have invested more resources into software than any other sector, and have spent three times the amount invested into media and entertainment on software development. Los Angeles also continues to develop technical talent, and universities in Los Angeles produce more engineering graduates than any other county in California - including those found in Silicon Valley.

A growing economy and rising wealth should attract new people to homes for sale in Los Angeles, though it may be difficult to add real estate to a region that is already strained to accommodate its current capacity. As property in Los Angeles attracts more wealth, a bidding war may result for the diminishing pool of available housing and office space. A significant gain from the region’s growing economy applies to landowners, as property inventory limits enable them to charge higher prices for homes.