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The Impact of Unicorns on Commercial/Multifamily Real Estate

Last year, my daughter requested a flying unicorn (like Pegasus) for her 5th birthday, so that she could fly above the clouds, and anywhere else she took a mind to.   I proceeded to tell her that it would it would be impossible to give her one, as no one has ever seen a flying unicorn – that they belonged to the world of fantasy.Impact of Unicorns on Commercial Real Estate

But there is another type of unicorn that is real – in fact, they are invading tech cities like Silicon Valley and Silicon Beach by the score. These new unicorns – defined as startups valued at one billion dollars or more – are making a dramatic impact on the communities they inhabit. For example, Uber just made a 330,000 square-foot purchase in Oakland, and Salesforce is taking over 1.4 million square-feet in office space in downtown San Francisco.  And here in Los Angeles, Snap Chat, Nasty Gal, and Space-X have set up corporate headquarters on the beach and in Downtown. With residential rental properties near corporate headquarters in high demand and low supply, an increasing number of young Millennials earning six figures are prepared to pay as much as 40% of their income for housing in Venice Beach; 50% for housing in San Francisco. With rental growth, the new rental metrics are pushing multifamily valuation to ever higher levels.

Are these real estate valuations sustainable? Is this the economy driven by Unicorns fantasy or reality?

In the meantime, my daughter, now a bit of a Star Wars nerd, has accepted the fact that unicorns (the ones that fly) don’t exist and has asked me to buy her The Millennium Falcon.

Now that is something I can order from Elon Musk.Future Star Wars

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