The recent flotation of Snapchat was extremely well received by the markets hitting a high which valued the company at $28 billion. While the share price has fallen back the founders of the company are now multi-billionaires. So, will the new Snapchat billionaires follow the general trend and by heavily into real estate?
Los Angeles coastline
Many believe that Silicon Beach will benefit from the recent flotation of Snapchat and the fact the area is home to the Los Angeles tech start-up industry. While it will be near impossible for any area of America to compete with Silicon Valley there is certainly some money floating around Silicon Beach. This 4 mile stretch of coastline is home to some of the most luxurious properties you could ever hope to see and real estate agents are already rubbing their hands in glee.
While the name might suggest a close correlation with Silicon Valley the culture around Silicon Beach is more hip and arty than pure techie. Indeed many people would suggest there are more pool parties than board meetings in the area which probably says it all.
Silicon Beach prices increasing
The average property in Silicon Beach is now worth about $1.88 million which is up 30% from 12 months previous. This perfectly reflects the ongoing focus on technology companies in the area and with many experts suggesting an array of technology IPOs will follow Snapchat, the money could keep flowing. While there are some concerns that the area is approaching a property price bubble, is it really fair to compare and contrast with traditional valuation methods. Properties in Silicon Valley seem to live a charmed life with very little in the way of connection with the real world.
The fact that Silicon Beach was described as a “backwater” just a few years ago would suggest the market is still relatively young. There is always concern when markets go up in a straight line, going against the trend, but when relating to technology shares and stock market flotations, is this not a whole different ballgame?
Home to 700 technology companies
Silicon Beach was initially seen as an escape route for those looking to avoid high rents and high property prices in San Francisco Bay. The fact that more than 700 technology companies now have offices in the region would suggest that it is starting to build its own economic climate. We know from the success of Silicon Valley that putting technology companies together creates a cumulative impact on local real estate.
While the likes of Facebook, Google and Microsoft have offices in the region there are many small up-and-coming companies which could yet raise significant funds. The next influx of property investors will be prompted by the Snapchat flotation even though the market has been extremely strong of late.
When looking at the likes of Silicon Valley and Silicon Beach it can be easy to compare and contrast with traditional real estate markets. The reality is that these areas are based upon growing technology companies and the microeconomic climate often varies enormously from the general economy. So, as much as people are trying to talk down the value of property in Silicon Beach and “avoid a property price bubble” these are not traditional markets, they are not valued by traditional barometers and they really do have a life of their own.