Like weather predictions, economic forecasts are more accurate in the short run than in the long run. And, the economic forecast for 2016 continues to shine brightly in the immediate future, with some haze rolling in as we look further out. In Part 2 of our forecast blogs, we would like to share the key points made in the 2015 Colliers International’s Trends Report and at the Silicon Valley Business Journal Economic Forecast event held earlier this month.

Jeff Fredericks, executive managing director for Colliers’ San Jose office, highlighted the following points from the 2015 Annual Market Report:

  • 2015 was a record year for Silicon Valley’s real estate market. The Valley experienced a net absorption of 9.5 million square feet, the highest since 2000. Office rents increases by 15.7 percent, and availability dropped to 8.4 percent from 2014. R&D properties gained 2.8 million square feet in occupancy. Finally, the availability of industrial properties plummeted to 2.55 percent, the lowest level since 1988. To sum up 2015 real estate activity in one word: scorching.
  • However, the fourth quarter real estate activity plateaued, which could signal a cooling trend for 2016. Overall, VCs and companies are proceeding with a little more caution, but there are positive signs as well in the form of large development opportunities in the pipeline in Oakland, Fremont, and San Jose.

Garrett Herbert, managing partner for Deloitte’s Silicon Valley office, offered his predictions for 2016 at the Silicon Valley Business Journal’s Economic Forecast event.

  • 2016 will remain a positive year for the region’s economy. He identified venture capital’s high levels of confidence in Silicon Valley as a key strength and positive signal for sustained regional growth.
  • However, the national economy faces three headwinds: the rising value of the dollar, the low price for oil, and a weakened Chinese economy. These factors are concerns for the national economy, but it is uncertain how much of a drag they will be to the Silicon Valley economy.

After Herbert’s remarks, he joined a stellar panel of local government leaders working on economic development efforts in the region: Christina Briggs, City of Fremont’s deputy director of Economic Development; Julio Fuentes, Santa Clara city manager; and Kim Walesh, San Jose’s Economic Development director and deputy city manager. Scott Ard, Business Journal editor, moderated the panel.

  • The biggest trend the panelists identified as a factor for regional prosperity is access to mass transportation. In the short-term, the linkage of BART to Silicon Valley with the opening of the Warm Springs Station will be a game changer. Fremont approved 4,000 units of housing and 1.4 million square feet of industrial development surrounding the station. In the long term, the news that the first segment of high-speed rail will link Bakersfield and San Jose will have a large impact on the region. The project will connect Diridon station to BART, Light Rail, Caltrain, Amtrak and buses through downtown San Jose. Think of it as “Grand Central Station West.”

While all of the forecasts identified a few clouds on the horizon, we are cautiously optimistic about the Valley’s economy going forward.

Photo Credit: Silicon Valley Business Journal: Vicki Thompson

From left Scott Ard, moderator and Business Journal editor; Christina Briggs, deputy director of Economic Development, City of Fremont; Julio Fuentes, Santa Clara city manager, Garrett Herbert, managing partner, Deloitte’s Silicon Valley office; and Kim Walesh, Economic Development director, and deputy city manager, City of San Jose.