From the Economist’s Desk: August 2016 Snapshot
Wondering how long Silicon Valley’s economic engine will keep on chugging? Read on to get the latest stats on San Jose’s economy, then head on over to our newly-launched economic indicators dashboard to take a look at the data for yourself.
This is the inaugural post of our “From the Economist’s Desk” series, featuring data dives and fresh insights from OED’s resident economist, Michelle Thong.
Job growth remains strong
Consistent with the positive national jobs report in early August, local employment continues to grow.
The San Jose metro area (Santa Clara County and San Benito County) had a total of 1,092,400 jobs in July 2016, up 3.0% (+31,500 jobs) compared to one year ago. The latest data available for San Jose indicates a total of 398,811 jobs within the city as of September 2015, reflecting robust growth of 3.2% (+12,285 jobs) over the past year. The Professional and Business Services sector experienced the most growth over the year (+3,750 jobs), followed by Construction (+2,400 jobs) and Trade, Transportation and Utilities (+1,810 jobs).
At 4.7%, San Jose’s July 2016 unemployment rate is 0.2% higher than June’s 4.5%, but still below the rate of 4.9% one year ago. Notably, the city’s labor force is growing, which is a positive indication that more residents are entering the labor market. As of July 2016, San Jose had a labor force of 559,600, up 2.3% from a year ago. San Jose’s labor force accounts for a significant 53% of the San Jose metro area labor force.
San Jose’s unemployment rate compares to a July 2016 unemployment rate of 4.2% for the San Jose metro area, 5.7% for California and 5.1% for the nation.
Real estate vacancies are down, and buildings are going up
As businesses expand, we are seeing continued declines in real estate vacancy rates, reflecting strong leasing activity even as new construction comes online.
Citywide, the Q2 2016 office vacancy rate is 9.1%, down 3.0% from a year ago. San Jose has 27.5 million square feet of office space, and more is on the way, with 1.2 million square feet under construction. Major projects include Federal Realty’s Santana Row office space (already leased to Splunk), Trammel Crow’s Midpoint @237 and Hunter Storm’s Coleman Highline.
San Jose’s R&D vacancy rate is 10.4%, down 2.4% from the same quarter last year. As a major tech employment center, San Jose has 42 million square feet of office space. Projects under construction include 182k s.f. for Supermicro Computer, a fast-growing server developer and manufacturer already headquartered in the city.
High demand for industrial and warehouse space from San Jose’s manufacturing and logistics sectors have resulted in an extremely low vacancy rate of 0.9%, down 2.1% from last year. New construction from Panattoni in South San Jose and Trammel Crow’s Midpoint @237 will bring another 680,000 sq.ft. online later this year.
Housing prices are high, possibly leveling
The high cost of Silicon Valley housing continues to make national headlines. According to a recent report from the National Association of Realtors, the San Jose metro area had the dubious distinction of being the first US metro area with a median home price above $1 million. Within city boundaries, the median price for a single family home is still below that mark, at $920,000, up 6.4% from the same time last year. At the close of the second quarter 2016, San Jose apartment rents average $2503 per month, up 4% from last year. However, rent growth has slowed compared to the prior year, when rents increased by 11% over a 12 month span. The apartment vacancy rate is also up slightly, at 5.1%, likely reflecting increased supply.