We know that corporate giants such as Google can make or break local economies, create massive demand for property and push prices to levels which are unaffordable for the masses. Google has major plans for downtown San Jose which will literally change the area forever and create a real estate market the likes of which residents have never seen before. So, what does Google have planned and how will this change the real estate market?
The creation of a “Google village” with up to 20,000 new jobs not to mention the 3000 additional jobs on the way from Adobe Systems – together with Amazon and Apple looking to relocate some operations – will change everything. At this moment in time there is roundabout 5,000,000 ft.² of office space but Google plans to introduce an additional 7 million+ square feet of office space. Yes, the Internet giant is going to more than double the office space available in downtown San Jose.
In reality we have seen similar moves across other areas of the US where corporate giants have relocated operations and staff. However, downtown San Jose is a very different situation to those we have seen before because it actually has space to develop and expand.
Supply and demand
When you bear in mind that Google will be creating of the 20,000 new jobs and Adobe Systems a further 3000 this is a lot of people to house. While there are already a number of ongoing property developments across downtown San Jose the fact is that demand will always come before supply. So, while real estate agents and developers in the area will be rubbing their hands in anticipation, it will take some time to introduce sufficient supply to service expected demand.
It is also worth noting that not only will this have a major impact upon housing stock but it will also impact local services and the retail market. The additional 23,000 workers, and their families, will need recreation facilities, eating establishments and general retail outlets. This will bring about the biggest change in the skyline of downtown San Jose ever seen.
The vast majority of the jobs created by Google, Adobe Systems, Apple and Amazon will be towards the higher end of the income scale. This means that demand for higher end properties will be enormous with little in the way of new supply. As a consequence, those currently sitting in houses towards the higher end of the price bracket in downtown San Jose will likely be bought out by those moving to the area on relatively high incomes.
The knock-on effect will see those living in older neighbourhoods pushed further afield and the chain reaction begins. Demand in the early days of expansion will be exceptional and many who have lived there for years may find it difficult to turn down mouthwatering offers for their homes. Eventually only those in the middle to higher income brackets will be able to afford property in the direct vicinity of the new employment hotspots, changing the whole character and make-up of the area.
The local authorities running downtown San Jose would be foolish to turn down new job opportunities but with these benefits come an array of issues and changes which are inevitable. This is a prime example of the pros and cons of major changes in a local employment market led by large corporate entities relocating their operations.