The Bay Area is a hot place to build cubicles, conference rooms and office suites. But don’t look for as many hammers pounding out new homes, condos and apartments.
The region is expected to open 18.2 million square feet of office space in 2018 — tops in the nation and more than New York City and Dallas combined — while home, condo and apartment building has grown only modestly.
More work space, more jobs and more people chasing a limited supply of homes is expected to add more steam to the pressure cooker of the Bay Area housing market.
“It’s encouraging that so many respected employers are investing in Bay Area jobs and immigration growth” said Carl Guardino, CEO of the business-backed Silicon Valley Leadership Group. “But we all recognize that jobs need a place to go home and sleep at night.”
The region created six times as many jobs as housing units between 2010 and 2015, according to a study by the leadership group and the Silicon Valley Community Foundation. The increased housing pressure has forced lower-income workers out of the region at much faster rates than higher paid workers, even as jobs go unfilled.
The run up in commercial development is led by major office openings in the South Bay, according to a survey from real estate data company Yardi Matrix. The big projects in 2018 include the official, complete opening of the 2.9 million square foot Apple Park in Cupertino, Park Tower at Transbay and The Exchange on 16th in San Francisco totaling 1.5 million square feet, and Facebook’s MPK 21, a half-million-square-foot campus designed by Frank Gehry in Menlo Park.
Other major developments underway include the Voyager property developed by Nvidia in Santa Clara, Microsoft and Google projects in Mountain View, the Stoneridge Mall Road project in Pleasanton, and Moffett Towers in Sunnyvale, according to Yardi Matrix.
The real estate data firm estimates that commercial openings in Santa Clara County are up 6.5 percent over the same period last year. The San Francisco and Oakland metro has seen three times as much commercial space open up this year compared to last year.
Meanwhile, housing starts have lagged on the Peninsula but have been stronger in the East Bay and San Francisco. Local governments in Santa Clara County have issued permits for 5,500 housing units through August, a drop of 8.5 percent from the same period in 2017, according to the Sacramento-based Construction Industry Research Board.
Residential building has been more robust in the San Francisco, Oakland and Hayward metro, with permits for 12,370 units issued through August, an increase of 10.3 percent from the previous year, according to the research board.
Planners and analysts say residential building has not been strong enough to make up for a decades-long deficit in new housing.
“If you keep pace in 2018, it doesn’t do anything to work off the backlog,” said Steve Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. “We need a lot more to work off the backlog.”
Levy believes the Bay Area recently has improved its mix of housing and commercial development. He pointed to major projects in Santa Clara County — North Bayshore in Mountain View and Vallco Mall in Cupertino — that are expected to bring thousands of new homes, condos and apartments. Several other developments have been planned and approved but have not been completed.
Robert Dietz, chief economist at the National Association of Home Builders, said residential growth in the Bay Area has been slowed by high costs for land and labor, in addition to nationwide increases in construction materials, especially Canadian lumber.
The surge in Bay Area office development also pulls construction workers away from residential projects, he said. And high housing costs for workers makes it more difficult to recruit skilled laborers.
The result has been rising costs for new home construction. “How do you build that starter home?” Dietz said. “You’re just going to chase your younger generation away.”
High housing costs remain a top concern among Bay Area residents, according to polls. California residents will vote on a $4 billion bond measure in November to support housing for veterans and low income residents. The additional funds will support subsidized housing but will not address the majority of the housing market.
“It is crisis proportions,” Guardino said. “The only step higher is Biblical proportions.”