Santa Clara County boasted $552 billion in property

Just call it the $552-billion county. At least, that’s what it was before the coronavirus pandemic struck.

A new report released by the Santa Clara County Assessor’s Office this week provides an in-depth look at Silicon Valley at the apex of a historic, 10-year boom, just before COVID-19 upended everything. As of Jan. 1, the assessed value of all property in the county totaled a staggering $551.5 billion — up nearly 7% from the year before.

But even in January, there were signs things were slowing down after a decade of gains. And with the pandemic wreaking havoc on the economy, next year’s assessment likely won’t look so rosy.

“We have peaked,” said Santa Clara County Assessor Larry Stone. “I was projecting a normal recession a year ago — a soft landing. And now it’s a crash landing. The normal recession has been exacerbated by the COVID crisis.”

To understand that, look no further than the cover art adorning Stone’s report. It’s a shot of the Silicon Valley skyline — dotted with construction cranes — in a rearview mirror, juxtaposed with a road sign reading “Caution uncertainty ahead.”

Santa Clara County is far-and-away the richest county in the Bay Area when it comes to the assessed value of its real property, defined as buildings and land, and business personal property, which is factory equipment and other business assets. Alameda County was second with $331.6 billion in assessed value, followed by San Francisco with $298 billion.

Much of the growth in real estate value in Santa Clara County was fueled by new construction and purchases in Sunnyvale, Mountain View and Santa Clara — including offices for Google and Nvidia, and a major expansion by the Westfield Valley Fair mall at the Sunnyvale-san Jose border.

Growth in offices and apartment buildings outpaced other sectors — ballooning by 14% and 10% respectively. Yet single-family homes continued to make up the lion’s share — 54% — of Santa Clara County’s real estate wealth.

Only two events trigger major increases in property value in California: new construction or a sale. Under Proposition 13 — the controversial 1978 state law that artificially depresses property values — a property’s assessed value, and property taxes owed, increases no more than 2% per year unless the property changes hands or undergoes construction.

Even so, real estate values have skyrocketed in Santa Clara County over the past decade. The 2011 assessment roll tallied $299 billion in real estate — and the number has risen steadily since.

“It’s sensational,” Stone said. “It’s been a great ride.”

That growth has largely been driven by the tech industry. Google was the largest property taxpayer in the county during the last fiscal year, ponying up more than $97 million. Apple was next, at $66 million, followed by Pacific Gas & Electric with a $62-million bill.

This news organization’s “Who Owns Silicon Valley?” project took a comprehensive took at Santa Clara County’s biggest property owners — a complicated metric to track because so many buy through various LLCS. As of 2018, Stanford was the top owner, with $19.75 billion in property, followed by Apple and then Google.

Even before the COVID crisis hit, the assessor’s office saw signs the real estate market was softening.

In the last fiscal year, 10,306 single-family homes and condos saw their market value drop below their Prop. 13-adjusted purchase price — making them eligible for a reassessment under Prop. 8.

That’s a six-fold increase from the prior year.

Next year, Stone expects to see even more properties decline in value. Commercial properties likely will be hit especially hard, as COVID has shuttered stores, restaurants and other businesses — some permanently. And office buildings are sitting empty as many people continue to work from home.

That loss of revenue brings down a property’s value, Stone said.

Last month, the average asking price to lease office space in Santa Clara County was $502 per square foot per month, according to data from Colliers International. That’s down from $518 in January.

“We’re starting to see lease rates come down a little bit, but not as much as you’d expect in a recession,” said Mike Pham, a senior research analyst with Colliers. “I think it’s mostly just the uncertainty that’s causing people to be a little bit scared. And when people get scared, leasing activity tends to slow down.”

On the residential side, property values so far have remained unscathed. Sales dipped dramatically in April and May as Santa Clara County scrambled to figure out how realtors could safely show properties during the pandemic. But demand picked back up once showings resumed, said Doug Goss, president-elect of the Santa Clara County Association of Realtors.

That demand has kept prices high. Last month, the median sale price for a single-family home in the county increased by nearly 14% over September of last year, according to Goss.

But the condominium market appears to have softened — the average price for a condo or townhome was down 4.5% over last year.

“From everything I’m hearing,” Goss said, “we anticipate the real estate market to continue to be strong here in the Silicon Valley area.”

Contact Marisa Kendall at 408-920-5009.