Knowledge Doesn’t Assist Mass Exodus Out of San Francisco

There have been wide reports of the mass exodus from the Bay Area during the pandemic, but a new business letter from Jerry Nickelsburg of the UCLA Anderson School of Management says the data does not support the claim. Instead, he sees a temporary change due to the pandemic and believes the market contraction could reverse once the pandemic subsides.

“I wanted to ask if the dates of a mass exodus in the Bay Area contain any evidence that technology is moving out and that Silicon Valley and San Francisco are no longer what they were before. The data say no; That’s not the case, ”Jerry Nickelsburg, faculty director and associate professor at UCLA Anderson School of Management, told GlobeSt.com.

Apartment rents in San Francisco fell dramatically during the pandemic, indicating difficult market conditions. However, Nickelsburg contrasts current market conditions with the 2000-2001 exodus from the Bay Area after the tech bubble. “The data cited for the mass exodus is the dramatic drop in rents. However, the percentage decline in rents was less than in 2001 when there was an exodus, ”says Nickelsburg. “House prices fell in 2001, but they are rising today. So this looks different from this event, and that’s because there is not a mass exodus, but a pandemic. “

Nickelsburg doesn’t have a crystal ball to predict how rents will react after the pandemic, but he predicts that both students and remote workers will return to the market, which could reverse the current trend. “This is not a prediction of what will happen to rents, except for the following: When students return to campus, they will increase the demand for rental housing, and when people return to the office, at least some will move back closer to their work to avoid the long commute, ”he says.

When asked about the exodus of companies from the region – both HPE and oracle have announced plans to move, along with a handful of smaller businesses – Nickelsburg doesn’t think these trends will have a significant impact on the market or that the pandemic has catalyzed them. “Some mature companies have decided to move their headquarters. The question you want to ask is, “Is this unusual?” If you look back over the past 30 years, this is not uncommon. If you look at relocations in the past 30 years, it’s for reasons that usually make sense, ”he explains.

For investors, Nickelsburg doesn’t mean this won’t be a challenging market in the short term, but there are still good reasons to stay in the market. “Investors always have to worry about changes in rental prices and occupancy rates. San Francisco rents are down 20%, but they’re still among the highest in the nation. So this could represent a loss of capital for apartment building owners, but it is not necessarily a discouragement for new rental properties. that remains to be seen, however. It’s an open question, ”he says, adding that California hasn’t resolved the housing shortage problem.