Commercial property rebound depends on tech

SAN JOSE — The outlook for commercial real estate in Silicon Valley remains “hazy” for the moment due to ongoing economic setbacks and uncertainties that the coronavirus has unleashed, Colliers International reported Wednesday.

One possible bright spot in the dark and forbidding economic landscape created by the coronavirus: a surge in venture capital funding for startups and a boom in initial public offerings by up-and-coming tech companies.

“The outlook for office remains hazy in the short term,” according to the Colliers International Market Forecast Report 2021 for Silicon Valley that was authored by Lena Tutko, a senior research manager with the commercial real estate brokerage.

Among the factors behind the fuzzy prospects for the office market in Silicon Valley: the effects of the coronavirus have created some conflicting trends regarding office usage.

“While the pandemic has shown that remote work is a viable and productive option for some, it has also been isolating and challenging for many,” Colliers stated in its outlook report.

As a result, the office market in Silicon Valley — and the rest of the Bay Area — is in a kind of limbo.

“Many companies are putting their real estate decisions on hold until there is more foresight on when it is safe to return to the office,” Tutko wrote in the report. “Many are looking to follow big tech, like Google and Apple, to model their comeback.”

Still, in the early weeks of 2021, tech companies appear to be looking forward, according to the report.

“As vaccinations accelerate, demand for office space will likely grow to allow for social distancing and circulation of people,” the Colliers report stated.

And some encouraging signs have emerged that are connected to relatively new tech firms.

Venture capitalists have raced to inject cash infusions into promising upstarts. Tutko noted in the report that this pattern often is a predictor of rising demand for office space.

Plus, an array of companies have successfully launched initial public offerings of their stock.

“Nationally, tech IPOs raised $28.3 billion in 2020, with the Bay Area accounting for $15.2 billion, according to Pitchbook Data,” Colliers stated in its outlook report.

That means the Bay Area raised 57.3% of all the IPO money raised in the United States last year.

Together, Airbnb, DoorDash, and Snowflake harvested $10.2 billion in 2020, according to Colliers.

The hotel sector remains in a tough spot since the coronavirus has chased away so many travelers, especially corporate journeyers.

“While the future of the hospitality industry remains uncertain, many experts argue that it is a matter of time before travel resumes and demand bounces back,” Colliers stated.

Leisure travel is expected to recover first, followed by corporate travel, while international travel will lag behind.

While the Silicon Valley hotel sector should show improvement by the end of 2021, meaningful recovery isn’t expected possibly for years, Colliers warned.

“Full recovery will most likely take us well into 2023 to get back to 2019 levels,” Colliers stated in the report.