San Jose Economy Remains Red Hot
Business Insider has once again named San Jose the #1 economy of the top 40 metro areas in the US. In 2016 (the most recent year data is available), GDP growth in the San Jose metro area grew at a faster clip than all other metros nationwide, increasing 6.9 percent year-over-year to over $236,000 per capita. Despite a slowdown in deals, venture capital—a major indicator of new business activity—remained strong during the first half of 2018, with businesses headquartered in San Jose receiving approximately $400 million across 14 different transactions, on track to exceed over $800 million in volume by the end of the year.
In the month of April, San Jose’s unemployment rate dropped to a 2.4 percent, the lowest rate ever recorded for the city since the Bureau of Labor Statistics began tracking the local rate 38 years ago. Since 2010, San Jose has added 70,000+ jobs, making up for and then doubling the 35,000 jobs that were lost during the Great Recession. The recent job gains include 18,000 new jobs in healthcare-related professions, along with 10,000 new jobs in construction, and 12,000 new jobs in scientific and information technology occupations. Manufacturing employment, which includes hardware technology prototyping, remained steady over the period, at around 52,000 jobs.
On the real estate front, San Jose’s office and R&D markets have continued their rebound since the recession. According to the latest Cushman & Wakefield data, the vacancy rate across the city’s approximately 27 million square feet of office hovers at just over 10 percent. Office rents average over $3.50 per square foot, varying based on location and product type. During the current market cycle R&D rents have nearly doubled to $2.00 per square foot, with San Jose accounting for approximately 30 percent of the region’s total R&D space.
The strong economic growth in San Jose and across the region has placed pressure to build more housing to support an expanding workforce and continued population growth. For its part, the City has built more than 23,000 housing units since 2010, the equivalent of a 50,000-person city. In late 2017 Mayor Liccardo announced a 15-point plan with an ambitious goal to build 25,000 new housing units by 2022, and the City is engaged in evaluating policies and providing support for attaining this target.
As business cycles wax and wane, OED will continue to monitor local and national economic trends and work to maximize opportunities for businesses of all sizes in San Jose.