The South Bay had a banner year for major property sales and new construction. Changes that had ripple effects — good or bad, depending on whom you ask — throughout Silicon Valley.
But a recent Santa Clara County assessor’s office breakdown offers another perspective on those changes: additional assessed property of more than $25.6 billion in the county as of Jan. 1, 2019. That added property value generated around $307.5 million in new property taxes, based on the county’s average property tax rate of 1.2 percent.
“You can see what’s going on and you just have to drive around to see all the new construction and those numbers speak for themselves,” Santa Clara County Assessor Larry Stone said in a recent interview.
Of that newly assessed value, nearly $5.75 million came from construction projects — 8,105 major additions, changes or brand-new buildings that were completed in the last year.
San Jose added $1.86 billion in additional assessments in the county alone and was home to four of the county’s 10 largest new-construction projects, the assessor’s report shows. Those major projects included Valley Fair Mall, on the border of San Jose and Santa Clara, which is working on a $1 billion expansion. Across the street, mixed-use retail hotspot Santana Row added a major office building and continues to grow after starting construction on another office, dubbed Santana West.
Those expansions are notable, the assessor’s report says, because analysts project 30 percent of the nation’s 1,100 malls will close in the coming four years.
“More retailers filed for bankruptcy during the first six months of 2019 than in all of 2018, over 7,000,” the report states. “The one exception are high-end malls. Valley Fair and Santana Row are at the forefront of this change, and added more than half a billion dollars in new construction in the 2019-20 assessment roll.”
Sunnyvale ranked second among cities that added considerable property value through construction, at $812 million in assessed value — more than $1 billion less than San Jose.
But the market’s new construction is highly “stable,” Stone said. In other words, the companies occupying the rising buildings and campuses aren’t likely to go anywhere soon, unlike during the early 2000s dot-com boom.
Apple is a good example of that trend, Santa Clara County Deputy Assessor David Ginsborg said.
“Apple’s old campus — Infinite Loop — Apple didn’t build that; Sobrato did,” he said. “They eventually bought it but then now what about the new campus? They buy it, (build it) and own it.”
Apple bought the land for its new Cupertino campus, Apple Park, from Hewlett-Packard in 2010. Google, which is building out its North San Jose footprint, in December spent $123 million to buy three office structures and a multilevel parking garage from San Jose-based Cisco Systems.
“You’re not only seeing a change in the approach, but you’re also seeing a passing of the guard,” Ginsborg said. “And Silicon Valley, thankfully, has been very successful at this changing of the guard.”
Though new construction is highly visible, the real moneymaker in real estate was property sales, the assessor’s report shows. This is perhaps unsurprising considering the effects of Proposition 13, a state law that depressed many assessed property values (the value property owners are taxed on) even as the value of properties for sale in the open market has increased quickly.
Proposition 13, passed in 1978, caps the amount assessed property value can raise annually at 2 percent. However, when a property is sold, it is re-assessed and taxed based on its current market value, which is why sales are often a major tax boon.
“Proposition 13 has significantly impacted … the potential property tax revenue,” Stone said. “If you didn’t have Proposition 13, everything would be assessed reasonably toward its fair market value.”
That value, Stone estimated, is more than double what properties across the county are assessed at today.
About half of Santa Clara County’s largest-value sales happened in San Jose, including the $283.5 million sale of CityView Plaza to San Francisco-based developer Jay Paul Co. and the $154 million sale of the Fairmont Hotel across the street in the heart of the city’s downtown.
Both properties had longtime owners before the sale, making for a significant increase in assessed value when they were sold.
But the past year has been especially active for the Bay Area’s largest city, which has garnered unprecedented attention from major real estate investors and prolific developers.
In all, San Jose’s 10,503 property sales accounted for about 40 percent of the $19.8 billion assessed property value increases from a change in ownership across Santa Clara County last year, the assessor’s report shows.
The interactive graph below shows how other Santa Clara County cities fared with their sales and assessed value increases.