Why Technology Will Fuel Our Lafayette CA Real Estate Market
I’ve been writing all week about why the “bubble” won’t burst anytime soon for the Bay Area real estate market, and in particular, for Lafayette CA real estate. I was talking a few days ago with Pacific Union’s CEO, Mark McLaughlin, about the tech economy’s impact on Bay Area real estate, and Mark asked me if I had any data on the wealth created through Bay Area based IPOs. Mark knows that I have several close associations with key execs in substantial pre-IPO companies that will likely go public within the next 12-15 months, and asked if I could do some data digging. Well, I turned up some interesting information that I am sharing with Mark, but also with you.
As a Lafayette CA realtor, I believe that one of the many value-adds that I can offer clients is a meaningful, in-depth understanding of the market. I sensed the market weakness and changing tide back in 2007, and for those interested in going back through my blog archives, I did a pretty good job of identifying its bottom. To really understand why the bubble won’t be bursting on Lafayette CA real estate, or anywhere within commute distance to SF anytime soon, one really needs to understand the drivers of today’s robust Bay Area economy.
In just the first quarter or 2014, approximately $1.3B – yes, BILLION DOLLARS – was pumped into Bay Area companies that did an IPO. They include companies like Energous in Pleasanton, Ultragenyx in Novato, Revance Therapeutics in Newark, Coupons.com in Mountain View, Versartis in Redwood City, TriNet Group in San Leandro who let the pack at $240M raised… and many more. The combined market cap of these companies is around $7B. The line up of Bay Area companies poised or rumored to be going public in the next year is extraordinarily impressive.
In 2013, CB Insights identified 472 tech companies that were expected to be “pipelined” for a public offering. Although, they don’t provide a breakdown of those located in the Bay Area, about 50% of the entire country’s technology company base is located in CA, with the overwhelming majority here in the Bay. Out of the 472 companies identified in 2013, 171 raised an additional $5B in equity funding, and 57 exited through a public offering or private purchase with an aggregate valuation of $44B. If we assume that roughly 50% of those companies are located in the Bay Area, the 2013 wealth creation was staggering.
With San Francisco real estate going through the roof, followed in tandem by the city’s rental market, tech company employees — from senior managers to engineers — are looking at alternatives to San Francisco real estate ownership. Lafayette CA real estate looks very attractive for the multitude of reasons we’ve discussed in numerous posts. As a Lafayette CA realtor, I’m quite confident that the present trend will result in further normalization in prices between Lafayette and some of the Peninsula suburbs that presently carry much higher valuations. With a scarcity of available land and the inability to appreciably add to the quantity of homes in Lafayette, there is really no place for prices to go, but up. Fasten your seat belt, it’s going to be an interesting ride!