In such a tech-heavy area like the Bay Area, when a major tech company goes public, the effects are sure to be felt all over the vicinity—not least of all in the real estate realm. As more Bay Area companies gear up to go public, many residents are left wondering how real estate prices will be impacted, if at all.
A Prime Example
When Facebook launched its long-anticipated public stock offering eight years ago, this led to a wealth boom in the San Francisco Bay Area where home values grew faster in places Facebook employees lived, according to a Zillow® analysis conducted seven years later. According to this analysis, every 10 Facebook employees living in a given census tract at the time of the initial public offering (IPO) were associated with an additional bump in local home value (up to 1.6 percentage points).
From March 2012 to March 2013, home values in areas occupied by Facebook employees climbed 21%, compared to 17% in all other Bay Area census tracts. This accelerated pattern resulted in an extra $29,800 in appreciation per average home in these areas dense with Facebook employees. Zillow’s findings have been corroborated by scholarly research, and this scenario forms a powerful example of what could result from approaching IPOs.
Additional Evidence
Writing for SSRN International Journal, researchers from the UCLA Anderson School of Management, Florida’s Rollo School of Real Estate, and Tokyo University Smeal College of Business recently revised their February 2019 study, “IPO Wealth and House Prices,” which empirically demonstrated the positive impact of initial public offerings on local house prices in California from 1993 to 2017.
Using the IPO events of public filing, issuing, and lockup expiration to distinguish changes in shareholders’ expected wealth, assessed wealth, and immediately available wealth, respectively, researchers found that on filing and issuing dates, house prices increased more for markets which were closer to the headquarters of IPO firms. On lockup dates, house price changes were positively associated with listing-to-lockup returns. This result suggests that original shareholders change their housing demand when their wealth changes. Relative to the East Bay, house prices in San Francisco exhibited sustained increases in response to IPO filings and more temporary increases in response to the issuing and lockup expiration dates.
Future Outlook
Now that the dust has settled after last year’s failed IPO of flexible-workspace giant WeWork, a slew of US tech companies are preparing to go public. The tech IPO Pipeline report for 2020 counts 281 US tech companies as possible IPO candidates, with California home to the lion’s share: 174.
Two-thirds of the companies in the pipeline raised their first round of funding between 2011 and 2015, and 27 of them hit a valuation of $1 billion this year.
Silicon Valley and Bay Area-based venture capital investors once again have the most portfolio companies in the pipeline, with Sequoia Capital, GV (Google Ventures), Andreessen Horowitz, Accel, SV Angel, Y Combinator, Kleiner Perkins, Institutional Venture Partners, and New Enterprise Associates all in the top 10.
Among Bay Area top tech companies considering IPOs are: Airbnb, Nurix Therapeutics, Annexon Biosciences, McAfee CyberSecurity, DoorDash, and the $12.4 billion cloud data warehousing startup Snowflake—one of the year’s most anticipated tech IPOs.
Can We Help?
This anticipated flurry of activity is expected to add strength to Bay Area home prices, which continue to climb despite the pandemic.
Cashing in on this trend is a matter of judicious timing, honed by experience. With close to twenty years serving Bay Area sellers, Julie and her team are uniquely positioned to help you capture top dollar for your property.
Call us at 650.799.8888 or write us at Julie@JulieTsaiLaw.com for a free consultation.
