Assessor: Silicon Valley structured to resist long-term declines due to big tech resilience

There has been a lot of banter about the exodus of companies to other states and that this could weaken Silicon Valley’s economy. Santa Clara County Assessor Larry Stone says the region’s economy is rebounding due to the resilience of big tech, which he believes is here to stay.

A guest speaker at a recent Silicon Valley Association of Realtors district meeting, Stone traced the effects of the pandemic, from stimulus money which the federal government provided to boost the economy, to inflation that has followed.

“In my opinion, the federal stimulus was way excessive and undisciplined,” said Stone.

Stone explained the purpose of the stimulus was to encourage people to spend the money in or

der to revive the economy, but since everything was still shut down due to the pandemic, consumers saved the money instead. Once states started easing Covid restrictions, a complete turnaround happened in 2021, and consumer spending reached record levels. This, combined with product and worker shortages, led to the highest inflation in three decades, eroding strong gains in wages and salaries and prompting the Fed to announce plans for several interest rate hikes this year, starting this month.

While parts of the country still struggle, Stone said the Bay Area job growth has continued to surge, outpacing U.S. gain. Silicon Valley’s unemployment rate fell from 6.6 percent to 2.9 percent at the end of last year.

“Silicon Valley’s economy is structured to resist long-term declines in economic activity. Big tech has a special kind of resilience because innovation is the driving force behind our success,” said Stone.

The residential market “has come booming back,” said Stone. Wealthy tech professionals, driven by record stock prices and low interest rates, are snapping up expensive homes. Luxury home sales have jumped 46 percent. Apartment rents, now above preCOVID levels, are up 12.8 percent for both new leases and renewals.

Stone reported the region’s industrial and warehouse markets are very strong. Investment interest in office buildings is hot. Venture capital hit a record high reaching $80 billion for the year and $29 billion in the third quarter alone. Angel investments were also up 21 percent year-over-year. Investment interest in hotels is booming. Hotel investment in Santa Clara County is up 174 percent.

The county Assessor addressed the “Great California Exodus,” which he said is concerning, but “not a crisis.” In 2020, 650,000 people left California for other states and 480,000 people came to California from other states, a net loss of 170,000 people.

Stone noted only four major companies have left California and by and large their employees have not followed. Tesla is still manufacturing cars in Fremont and recently leased a 325,000 square foot office building in north San Jose. Apple, which is worth $3 trillion, just purchased five office buildings in Cupertino. Google is worth $2 trillion. Facebook is worth $1 trillion.

Eighty percent of all tech R&D is in Silicon Valley. “That’s not going to change anytime soon. I think the demise of Silicon Valley is grossly exaggerated,” said Stone.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.