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Is San Jose Really a Supply-Constrained Market? March 9, 2010

Posted by Bob Cook in Real Estate Markets, Silicon Valley.
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ING/Clarion has released some thoughtful work that suggests that San Jose and San Francisco are among the most supply constrained metropolitan office markets in the country.  The work uses the relationship between increases in rental rate and supply increases as a measure of price elasticity, which ING/Clarion thinks is a good proxy for how constrained supply is.  

It’s no surprise that San Francisco is high on the list of constrained metros with it’s challenging  geography and its regulatory constraint on downtown growth — the so-called “beauty contest” that allows only so much office space to be built each year.

San Jose, though, is not quite so clear.  There have been and continue to be plenty of good sites to develop along the 237 corridor, in the Moffett Field area, along the 101, and in downtown San Jose — not to mention many sites with one story office structures that are prime for redevelopment.   In fact, there have even been some developer-requested downzonings in recent years — commercial to residential.  All this had me thinking that office supply is not particuarly constrained in the San Jose metro – which most people, of course, call “Silicon Valley”.

Nevertheless, one of the benefits of a statistical study is that it can challenge our thinking which tends to be based on anecdotes.    And so I’m going to be doing some rethinking.  And I’m wondering what others are thinking.

Here’s the article:

Why Supply-Constrained Markets Hold So Many Advantages.

Please comment.

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