Incubators and workspaces are part of the startup fabric in Silicon Valley as well as in Israel. A very unusual option is a 17,000 sq. ft. mansion, the ‘Ritz’ of incubators, appears up in Woodside, California, a rural area adjacent to Palo Alto, Atherton and Menlo Park. 

We're building a community of excellence in one of the most impressive estates in Silicon Valley. We believe that the right people in a place like this can make for a great environment, and geometric scaling of success for everybody.”\

Thus begins the preamble of the craigslist description The Startup Castle located near Stanford University and Sand Hill Road.  Among the more imaginative alternatives for housing and startup workspace, is the Startup Castle near Stanford University and Sand Hill Road.


http://www.startupcastle.org
.

 The operators are clear about their likes and dislikes in terms of housemates.  A craigslist advertisement shows the quirky requirements for admission: http://sfbay.craigslist.org/pen/roo/5022581693.html.  This outlines a recital of personal disqualifying attributes from living in a mansion for a very reasonable rent.  For example:

- Watch more than 4 hours of TV/movie/game entertainment per week

- Have more than 1 tattoo

- Have ever attended more than 1 protest

- Make more than three posts a week to social media

- Listen to songs with explicit lyrics more than once a day

- Wear make-up more than 5 days a week

- Own any clothing, shoes, watches, or handbags costing over $500

- Have bills that get paid by somebody else

- Drive a vehicle that was given to you by your parents

- Get regular spending money or gifts from your parents

- Have more than one internet app date per week

- Have a complex diet that requires lots of refrigerator space

- Drink alcohol more than 3 drinks per week

- Use marijuana more than twice a year

- Use any other drug more than twice in your entire life

 At first I thought this might be a hoax, but apparently not.

Meanwhile…

Two months ago a friend placed his 3-bedroom ranch-style house on the market for $2.2 Million.  Within days he had multiple offers for the house, and its sold for $2.88 Million – to a Facebook back-end server engineer. 

There’s a lot of press right now on the latest bubble, including a recent article in Tech Crunch. Silicon Valley real estate, both residential and commercial, has always been expensive.  Cost of living has always been a key factor for employees considering relocation to the valley.  Indeed, when comparing the price and value with most other areas in the US, it doesn’t make sense.  My advice when asked is: if you’re planning to stay more than five years, hold your nose, buy the house, and hang on for the ride.

The American dream traditionally meant owning your house, and ratcheting up into larger houses as families grew.  However, in these circumstances, and in California in particular, the traditional trajectory is hobbled by the tax impacts (principally due to California Proposition 13) of selling a house to upsize.   As a consequence, many of us live in houses that we could not afford to purchase today. 

The prices are attributable to a relative fixed supply of housing; growth of the iconic cornerstone companies like Facebook, Google and Apple; and relative reputation of school districts. Menlo Park itself has four school districts bisecting the city, generally from the East (Facebook territory) to the West (the foothills), reflecting increasing real estate values going west.

Stanford student count expands.  The demographics of Oak Creek, a 700-unit apartment community on Sand Hill Road across from the university, has changed from diverse adult population to students, as Stanford’s student / employee housing stock has not paced demand. 

After acquiring the former Sun Microsystems Campus, Facebook began a process of acquiring large swaths of adjacent properties for additional office space – and employees. Facebook is ahead of municipalities in planning vision – and has the means to accomplish what they want in style.  Noted architect Frank Gehry designs the new office buildings, adding to Facebook as a tourist destination.

 There are certain consequences to this rapid acceleration.  One of which is that if you’re in a house for a long time, you tend to stay there since moving would have increased property tax consequences without any better benefits.

 

‘Expensive’ in Silicon Valley can vary greatly by location and city; elevation; school district.



Figure 1 The Almanac Real Estate Edition - 2015 (Used with permission)  
http://www.almanacnews.com/special_pubs/menlopark/77/section1.pdf

Housing prices reflect the state of the economy.  Six years ago we were in a housing price recession due to the mortgage foreclosure meltdown.  The recovery has been brutal.  We’re in another housing bubble due to several factors.  First is the expansion of Facebook’s campus, and an increase throughout Silicon Valley. The other factor feeding the housing the bubble is an influx of foreign capital being parked in a relatively stable and desirable area.


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