Greg Chow
As the home of Apple’s corporate headquarters, Cupertino, CA, has seen its fortunes rise, along with the company’s meteoric success. The once-modest suburban town just west of San Jose is now one of the costliest housing markets in the country, with a median list price of $1.65 million.
But now, the company that challenged America to “Think different” is throwing down the gauntlet again. Instead of changing the world with the introduction of the iMac or iPhone, Apple is challenging the very concept of how a corporate headquarters can look and function. The impact radiating out to the surrounding area’s real estate values is bound to be huge.
The company, one of Silicon Valley’s largest employers, is preparing to open its vast new, flying-saucer-like Cupertino campus next year, just a couple of miles down the I-280 freeway from its current location. Featuring 2.8 million square feet of office space and due to open in 2017, it’s bordered by residential neighborhoods. Which led our data team to wonder: What exactly will be the “Apple effect” on these nearby homes—and on the rest of Silicon Valley?
The wildly innovative new Apple complex was one of co-founder Steve Jobs’ final obsessions. He presented the plans to the Cupertino City Council in 2011. The ring-shaped campus sits on 176 acres of land; Jobs promised it would be “self-sustaining” and “earth efficient.” Nonetheless, no expenses have been spared in the construction of the circular building, whose circumference is more than a mile. Its interior wood, for example, is said to be harvested from a certain species of maple, and “only the fine-quality ‘heartwood’ at the center of the trees would be used,” an Apple insider told Business Week.
A rendering of Apple’s new headquarters
Courtesy of the City of Cupertino
So what will it all mean for local real estate?
To calculate the Apple effect, our data team looked up homes lying within a 5-mile radius of the new campus, and compared the median list price in the second quarter of 2016 with the same period last year. The 5-mile radius covers most of Cupertino and the neighboring towns of Sunnyvale and Santa Clara, plus small sections of Mountain View, Saratoga, and San Jose.
What we found was a market already going through some very big changes.
The median list price for homes within a mile of the new campus saw a whopping 20.5% median price increase over the past year alone—nearly double the 11% increase we saw for the rest of Santa Clara County. And that’s in a market that has seen steady price increases for years already.
In fact, Apple’s real estate impact truly kicked in back in 2013, when the Cupertino City Council approved the structure. Since then, the average annual increase of homes within one mile of the campus site at the corner of Homestead Road and North Wolfe Road has been 18.4%, 3.4% higher than the county average.
Looking at the surrounding homes, you’d never guess their value. Most look as if they haven’t changed since the 1960s—ranch-style houses with only one story and bland beige paint.
But for serious buyers who can afford the prices, now is not the time to be picky about looks. Currently, there are only 14 homes on the market within 2 miles of the new campus.
To drum up seller activity, Realtor Andy Tse has been going door-to-door in the surrounding neighborhoods, asking homeowners if they would be interested in selling their homes. He says he knocks on 15 to 100 doors each time he visits.
“Maybe one in 500 or 1,000 will be interested, and one in 2,000 will do a transaction with you,” says Tse. “They have to have a very specific reason to sell.”
Since the new campus isn’t open yet, Bay Area real estate experts believe that sellers are probably holding on in hopes of a bigger payday down the road.
“Right now, communities are waiting for it to happen. I think after the new headquarters open up next year, you’ll see an explosion of new homes [on the market] in the area,” says Realtor Greg Cary.
The new Apple headquarters, nearly complete.
Greg Chow
What’s happening to the rest of Silicon Valley?
Of course, there are other forces affecting the value of Silicon Valley real estate—not necessarily for the better.
“Silicon Valley’s housing is closely tied to the stock market. When the stock market goes up, prices go up,” says Tse. “The past year specifically, the luxury real estate market is slowing down, as there is less money from China.”
As evidence, the wealthy enclaves of Saratoga and Los Gatos, south of Apple’s new campus, where luxury homes are more plentiful, saw prices drop over the past year. And despite the big boost in the neighborhoods near Apple, Cupertino as a whole—a town with a large Chinese population—also saw a drop. As a small town with limited housing inventory, the median price is more susceptible to fluctuation. In the longer term, however, there’s a clear upward trend, and it is likely to affect every corner of Cupertino.
Bottom line: The new Apple HQ is leaving much of the Silicon Valley market in flux.
To understand why, it’s useful to make a distinction between buyers with the capital to buy a $10 million mansion and Apple workers interested in living within walking distance to their company’s new campus for work. These two groups constitute completely different markets, according to Realtor® Connie Miller.
Santa Clara, for example, would mostly fit into the latter category. The town borders Apple’s new campus and has remained a relatively affordable part of Silicon Valley, thanks to its lack of quality schools, Miller says. In fact, it has the lowest median list prices in the surrounding area. But it appears to be becoming more and more appealing to young engineers without children. In the past year, homes in Santa Clara saw a 17.5% price jump.
Can Cupertino survive Apple?
Amid the growing home prices, and rising prosperity, there are fears that the heart of this once-placid town is being lost.
Before Apple moved in to the city in 1977, Cupertino was largely a town of ranches and orchards. As Apple’s success—and its real estate footprint—grew, restaurants and businesses clustered around it, and residential developments soon followed. It’s now hard to tell where the city ends and Apple begins.
Apple’s 16,000 employees account for 40% of Cupertino’s jobs, according to a 2013 report commissioned by the company. When the new campus opens, the company projects that it will be home to 24,000 Cupertino-based employees.
“Because the traffic is so awful here, local communities are telling the tech companies they want their workers to live closer to work,” says Miller. “It’s creating a huge demand near the new campus.”
Will prices really continue their unabated rise? And how high is too high?
“When I moved to Cupertino 30 years ago, I thought it was already expensive,” says local Realtor Martin Ku. “But prices have just been going up and up, along with the demand.
“Will the prices go up in the next 10 years the same way they did before? Entry-level homes, certainly. But continued double-digit gains overall? It’s hard to say.”
The post The Apple Effect: After Spaceship Campus Lands, Will Silicon Valley Prices Soar? appeared first on Real Estate News and Advice - realtor.com.
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