Santa Clara County Real Estate Growth Stagnates Amid Commercial Market Turmoil
The Santa Clara County real estate market recorded its slowest growth in over a decade, primarily due to ongoing challenges in the Silicon Valley commercial real estate sector and the lingering effects of tech industry shifts.
Santa Clara County’s annual property tax assessment roll, valued at a record $725.7 billion as of Jan. 1, 2025, increased by a mere 4.15% for the 2025-2026 fiscal year, adding $28.9 billion. This marks the slowest expansion since 2012, a direct consequence of persistent issues within the commercial sector, according to a recent report from the county assessor’s office.
Commercial Real Estate: A Drag on Growth
The commercial real estate market in Silicon Valley and across the nation has been significantly impacted in recent years by the rise of remote work, escalating office vacancies, and an increase in delinquencies. “COVID disrupted practically everything in life, and property values were not immune to that,” a county official noted. The report indicates that Silicon Valley’s office vacancy rate has stubbornly held at approximately 20% for the past two years.
Compounding these challenges, extensive tech layoffs impact the market by creating a negative feedback loop that contributes to higher vacancies and declining rental rates. In the first half of 2025, over 70,000 tech employees were laid off, following more than 150,000 terminations in 2024, according to data compiled by Layoffs.fyi.
This downturn has disproportionately affected cities heavily reliant on commercial properties. Mountain View, which saw the highest roll growth last year, experienced a steep drop-off this year due to its significant engagement in office and research and development buildings. Other cities with notably slow growth included Sunnyvale, Milpitas, Cupertino, and San Jose.
The Rise of Data Centers
Conversely, some areas have thrived. Morgan Hill, for instance, saw the highest rate of growth, buoyed by its stable residential property values. Santa Clara also performed well, driven by robust data center investment. The city currently hosts 75 data centers, the most in California, according to the Data Center Map. “Data centers are hot and they’re getting hotter,” the outgoing county assessor added, observing that the burgeoning artificial intelligence sector is spurring massive investments in data center construction nationwide.
Drivers of the Assessment Roll
The primary contributors to this year’s assessment roll growth were changes in property ownership, particularly residential transactions, and the annual 2% property tax increases allowed under Proposition 13 for properties that did not change hands or undergo new construction. The limitations on property assessments and taxes imposed by Proposition 13 directly impact funding for Santa Clara County schools, as many local districts, including those in Mountain View and Palo Alto, rely heavily on local property tax revenue.
New construction also contributed to the roll, though its impact was 34% less than the previous year. The report highlights significant delays in several commercial development projects due to high interest rates, rising construction costs, and diminished demand for office space. Overall, reductions in the commercial real estate sector decreased the total roll by $4.5 billion. Any gains from business properties were offset by increased exemptions, roll corrections, and Proposition 8 reductions, which allow property owners to apply for temporary value reductions when their property’s market value declines.
Appeals and Outlook
On June 30, Santa Clara County distributed nearly 500,000 Notification of Assessed Value cards for 2025. Property owners have until Aug. 1 to informally appeal their valuations and until Sept. 15 to apply for an official Proposition 8 reduction. The county assessor’s office anticipates an increase in appeals this year, with commercial properties accounting for 98% of the more than $100 billion in assessed value currently under appeal.
Despite the prevailing economic uncertainty and discussions of a potential recession, the outgoing county assessor believes the future of Silicon Valley remains “bright,” citing the region’s “special kind of resilience.” “In my term as the assessor, and even when I was in the real estate investment business before this, I’ve been through the [Savings and Loan] debacle of 1990, the dot-com bust in 2000, the great recession in 2008, the COVID recession, which was not a real estate recession, it was a medical recession, and now [this],” the official reflected, as his 30-year tenure concludes this July. “So, we’ve been through these things before,” the official stated, emphasizing that 80% of all tech research and development investment occurs in Silicon Valley, and trillion-dollar companies headquartered in the region, such as Apple and NVIDIA, continue to invest.
