Pumping the Bubble? CBRE's Forecast for Bay Area Real Estate is Optimistic

Now, about that bubble question. Colin Yasukochi, CBRE's director of research and analysis, showed an eye-opening chart that revealed rents are not yet at their bubblicious 2000 highs. Office rents in Palo Alto would have to rise 56 percent to reach their peak; Mountain View, 28 percent; Redwood City, 55 percent and San Francisco, 18 percent.
"Are booms always followed by busts?" Yasukochi asked. "The last two were. Based on what's happening in real estate today, the current boom is still getting bigger." 

In a wide-ranging discussion, most panelists agreed. George Fox, an executive vice president with CBRE in Palo Alto who focuses on tenants, said the current economic climate feels a lot different than the late-1990s. 

"It's been sustainable growth, Bay Area-wide and involves a lot of different industries, unlike back in the late 1990s," he said, singling out new sectors such as automotive, social, and solar, among others. "All that feeds everything else: the retail, the housing, the construction. In my world, it's not a bubble... (Companies') biggest issues are, who are we going to get hire and how are we going to get them?"
Raul Campos, a CBRE managing director in San Francisco, said many of today's tech tenants driving demand can afford to spend more money on space because they're generating more money. It's not as much an issue of affordability as it is availability, he said. 

"The underlying technology is so profitable that they're ramping up as fast as they can," he said.

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