July 30, 2015

Tech Company Shifts Position Sunnyvale as Major Hub for Next Decade

In Silicon Valley, some of the most prosperous cities and most sought after zip codes to live, raise a family and send kids to school, are directly dependent on the proximity to corporate headquarters of the leading technology companies. As some of the biggest companies are running out of room in their headquarter cities, the resulting demand for continued growth is putting pressure on neighboring communities. Sunnyvale looks like ground zero for this next wave.

Cupertino, home to Apple, the most valuable company on the planet, has a median home price north of $1.7 million dollars, up 15% year over year. Mountain View, home to Google, has a median home price above $1.3 million, up 20% year over year. And these high marks significantly trail the more upscale suburban locales such as Palo Alto ($2.44 million average) and Los Altos ($2.65 million average). Quietly sitting wedged between Mountain View and Cupertino, in a state of tug of war between Apple, Google and more companies, like Yahoo!, LinkedIn and NetApp, is Sunnyvale ($1.28 million average). Sunnyvale has not only seen the fastest increase in average home prices over the last 12 months, but is set up to see even more demand as jobs flow to the city. As a biased Sunnyvale homeowner and area employee, this is very interesting to watch.

Bay Area Housing Prices: High and Increasing

As the total land available to new workers entering the area or existing employees looking to leave apartments and find a home near their office stays static, the old rules of supply and demand are taking hold. Sunnyvale home prices are up 23% year over year, at a pace slightly above the surrounding neighborhoods, higher than the aforementioned Cupertino, Palo Alto, Mountain View and Los Altos, but even quicker than Facebook's home, Menlo Park (up 17% y/y), or San Francisco, home to Twitter and many others (up 13% y/y).

Sunnyvale's Average Increase Highest Over the Last 12 Months

So why is this? And who cares? As somebody who has been working in the Valley since the rise and fall of the first dotcom boom in the late 1990s, I've seen ebbs and flows in the economy impact hiring, funding, area traffic and housing prices. Big names that once were major land owners and employers, like Sun Microsystems and SGI, can virtually disappear. But when large companies present stability and prosperity, they can be a magnet for skilled workers. And in the last two years, you have seen major announcements from Valley leaders, like Google, Apple and LinkedIn, announcing new campuses or building into Sunnyvale, as offices in neighboring Mountain View and Cupertino become saturated.

While much press has been spilt over Apple's amazing spaceship campus under construction in Cupertino, what few note is that this work, taking over an older Hewlett Packard lot, is snugly cornered on the border of Sunnyvale city limits, and the company has been snapping up buildings all over the city to manage growth. LinkedIn has been building sparkling new buildings in downtown Sunnyvale and looks poised to move thousands of workers there soon. Google has made headlines as they've taken over buildings from Juniper Networks and even took over nearby Moffet Field.

This expanded pressure from Cupertino on the South border, and Mountain View to the West and North, is pushing Sunnyvale costs and demand upward, much like new mountain ranges are formed under pressure from moving tectonic plates. And this isn't to say that Sunnyvale doesn't already have significant employment hubs of their own. The city's largest employers include Lockheed Martin, Northrop Grumman, Synopsys, Broadcom, Infinera, Nokia, and and many of those I've already mentioned, like NetApp, Juniper and Yahoo!. But the new occupants in the city come armed with significant war chests and momentum, almost certainly strong enough to ward off any turndown in the hot tech economy or an eventual recession.

The stats are Sunnyvale are fairly pedestrian as Bay Area cities go. The last census reported just shy of 150,000 residents, and a workforce of nearly 120,000. The city has adapted to economic shifts, from agriculture to defense to microprocessing through Silicon Valley's first wave, and now, the Internet. With Google bordered to the East by water and marshlands, and Apple by rolling hills of past Highway 280, the growth point is aiming straight at Sunnyvale. Watch this space.

Disclosures: I work at Google, and live in Sunnyvale.

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