Santa Clara County property values up while growth slows

Santa Clara County property values are seeing their lowest growth in more than a decade due to economic uncertainty and stalled development.

Yet the total net assessed value of all real estate and personal property – known as the assessment roll – reached a new height of nearly $726 billion, County Assessor Larry Stone announced Wednesday. Home sales increased by 3% and accounted for 86% of roll growth.

This year marks Stone’s final assessment roll before he steps down on July 7 – marking an end to one of the county’s longest serving public officials.

“Just a few years ago, office buildings were the darling of commercial real estate investment. That’s not the case anymore,” Stone told San Jose Spotlight. “Foreclosures are almost weekly — hotels, office, some industrial. They’re just throwing the keys and giving them back to lenders.”

Stone said several significant commercial development projects have stalled due to high interest rates, surging construction cost and sinking demand for office space. Google’s “Downtown West” project in San Jose was slated to begin in 2023, but remains in limbo. Stone also pointed to “The Rise” development at the former Vallco Mall in Cupertino, a planned mixed-use development that required a redesign and cutbacks before it could move forward. The 240-acre mixed-use development, known as “Related Santa Clara,” is another significant project facing construction delays.

Surging vacancies, dropping rental rates, a shortage of big leasing deals, and the continuation of hybrid and remote work have kept the office vacancy rate in Silicon Valley at roughly 20%  for the past two years, according to the assessor’s office.

Stone said office buildings are being sold at major discounts. He points to VTA’s purchase of Sobrato Office Tower at 488 Almaden Blvd this year. Stone said VTA paid 61% of the assessed value. He said he doesn’t expect the commercial market to turn around for another few years.

Elsewhere, Stone said Silicon Valley is experiencing different trends compared to the rest of the nation.

“Job growth throughout the country is pretty good. Around here it’s not. The high tech companies have jettisoned about 11,000 jobs this year,” Stone said. “Silicon Valley and Santa Clara County are experiencing a different level of trends related to property values than you’re finding in other parts of the state or country.”

The assessment shows that while home sales are slow, the residential market is still strong.

Brett Caviness, a local realtor and former president of the Silicon Valley Association of Realtors, said the current market has opened new opportunities for potential buyers who felt priced out due to more aggressive competition in prior years.

“We’re seeing more people able to access homeownership than they were to before. That’s a bright point,” Caviness told San Jose Spotlight. “The takeaways for me are: it’s still a good time to be selling and an even better time to be buying.”

Changes in ownership and new construction added $16.1 billion and $3.8 billion to the total increase, respectively. Business and personal property values added $1.8 billion. Nearly 8,700 properties remain in declining value status due to Prop. 8, which allowed temporary reductions in assessed value in cases where real property suffered a decline in value.

Prop. 13, which restricts property taxes, added $14.4 billion to the assessment roll. But Stone said it continues to come at a cost to schools and local governments who depend on property tax revenue to support essential services.

Slow home sales and stalled construction will likely continue to lag assessment roll growth in the years ahead, Stone said. But he’s optimistic about the region’s long-term outlook, as some of the world’s largest tech companies – Apple, Microsoft and NVIDIA – are still concentrated in Silicon Valley.

“We still lead the country in the amount of venture capital investment and a lot of it is based on Artificial Intelligence,” Stone said. “It doesn’t mean we aren’t facing trends that are pretty discouraging right now. But I think the future is bright.”

Contact Brandon Pho at [email protected] or @brandonphooo on X.