2017 Economic Forecast is “Sluggish” but Here are Five Reasons Why Silicon Valley is Poised to do Better Than the Rest
Good news! Kind of. Real estate magnate Louis Belmonte does not predict a 2017 recession. “There’s no bust because busts follow booms and believe me, there’s no boom.”
Belmonte headlined the Silicon Valley Crew annual forecast event, acknowledging that true “futurists” are a rare breed, given their general propensity to think about the future as “the present plus one.”
There are a number of things that Belmonte is concerned about – low levels of population and productivity growth and meager labor force participation. Most concerning of all being that “demographics are destiny” and our aging population stands to cause many ripple effects in the economy.
However, there is no question that Silicon Valley is doing better than the rest of the country and the “why” can be summarized in one word – wealth. Specifically, wealth is flowing into the Silicon Valley economy because of technology. These are the five primary vehicles bringing in the dough.
- Exports. U.S. exports are looking strong. Assuming other world economic powerhouses stay solid, the sun will keep shining.
- Initial Public Offerings, or IPOs, or “wealth created from scratch.” IPOs are on the decline and are not likely to come back without major legislative changes.
- Buy-outs. Startup sales are a vibrant area for Silicon Valley. Bigger companies routinely procure new ideas from their smaller, more nimble counterparts.
- Venture Capital. Venture capitalists are increasingly scared and risk-adverse, resulting in less activity.
- Taxpayer Subsidies. Public investment in sectors such as biotechnology and cleantech will likely diminish with new leadership in D.C.
The takeaway? Although SiliconValley is still top dog, less money flowing in still has notable effects on the local economy and real estate markets.
In relation to the various real estate sub-markets, Belmonte was bullish on industrial, but less optimistic about multi-family (overbuilt) and office (stagnant). Industrial space is booming across the U.S. based on several demand drivers including reshoring, coupled with the natural gas supply and a more chaotic environment overseas. As for retail, Belmonte noted that we are witnessing a sea-change in retail formats. There are less brick-and-mortar stores, but the rise of e-tailing is driving demand for industrial warehouse space.
While the market may swing, Belmonte believes in Silicon Valley’s ability to play a major role in solving some of the world’s biggest problems.