Property value growth was the lowest it has been in more than a decade.

Real estate values across Santa Clara County increased 4.15% last year for a total of $28.9 billion, the lowest increase since 2012, according to an annual report released by the Santa Clara County Assessor’s Office in July. 

The assessment, called the roll growth, is a snapshot of the net assessed value of all business and personal property throughout the county as of the start of the year. It shows that the value of that property reached a new high of $725.7 billion.

A retraction in the commercial market was largely responsible for the stagnation. New construction accounted for $3.8 billion, 34% less than the previous year.

Greg Monteverde, the county’s acting assessor, said the change will manifest in a switch in how developers use real estate.

“What you are seeing is a tale of two stories in the residential market and the commercial market,” Monteverde said. “That is a trend we are seeing more and more now … It is a problem that is probably going to take a few years to settle.”

For the past two years, the office vacancy rate has hovered around 20%. Reasons for this include declining rental rates, the absence of big leasing deals and an increase in hybrid and remote work, according to the assessor’s office. 

Office buildings are selling for less than assessed value more frequently since the pandemic. Foreclosures from delinquent loans are also becoming more frequent.

A portion of Related Santa Clara shifting from office to industrial illustrates this trend well, Monteverde said.

“Wherever you see that office product developers are going to think twice about developing an office product and develop something more viable,” Monteverde said. “It is kind of a bit of a change in the landscape around here.”

This year’s roll includes 8,699 properties in decline status, a drop from 11,226 the previous year.

Contrasting commercial development, residential property transfer accounted for 86% of roll growth.

Proposition 13 limits the property assessment without new activity to the California Consumer Price Index (CCPI) or 2%, whichever is lower. Such assessments added $14.4 billion to the roll growth. That limitation is a significant benefit to most property owners.

Although residential transactions have been on the decline the past couple years, they saw a small rebound in this year’s roll growth, increasing 3%.

“One of the problems with lesser roll growth is that all these public entities are very dependent on property tax to fund operations,” Monteverde said. “That is very problematic in an environment where cost is rising and revenue is decreasing.”

However, Monteverde said his office expects growth to recover next year and that the county is in a good position overall.

The deadline for property owners appealing their assessment is Sept. 15.

Contact David Alexander at d.todd.alexander@gmail.com

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