Commercial real estate woes weigh on Santa Clara County property values

Santa Clara County’s total property assessment roll reached a record $760.1 billion in January, yet a struggling commercial real estate sector has slowed the pace of growth to its third-lowest rate since 2012. While residential transfers and business equipment investments bolstered the 4.7% annual increase, declining values for office buildings, hotels, and retail centers are creating significant uncertainty for future tax revenues. This deceleration is prompting warnings of potential service cuts for public agencies and schools that rely heavily on property tax distributions.

According to the Santa Clara County Assessor’s Office, the total assessment roll rose from $725.7 billion in 2025 to $760.1 billion as of January, a 4.7% increase. Despite the record high, County Assessor Neysa Fligor noted that the volatile nature of the local real estate market, particularly the commercial sector, is stunting overall property values. Challenges in the office, hotel, and retail markets have led to properties transacting at prices lower than their existing roll values, contributing to a surge in Proposition 8 decline-in-value status. The total number of properties in this status nearly tripled to 24,727, with commercial sites in decline rising 46% to approximately 625 properties.

The impact of the commercial downturn is further evidenced by the fact that 98% of the $153.6 billion in assessed value currently under appeal belongs to commercial property. While land-use consultant Bob Staedler highlighted the region's long-term resilience—noting an 81.3% increase in roll value over the last decade—current trends show a clear moderation in growth compared to previous five-year cycles. Public officials like Russell Hancock of Joint Venture Silicon Valley warned that this slowdown could force local governments to make painful trade-offs and reduce services as tax revenue growth cools.

Geographically, the impact varied across the South Bay, with Sunnyvale leading growth at 7.2% due to major office expansions by Google, Applied Materials, and Intuitive Surgical. Conversely, Mountain View saw the slowest growth at 2.9%, followed by Gilroy and Milpitas. Despite the broader market slump, some industry experts see opportunities; David Sandlin of Colliers suggested lower values could lead to more affordable rents and expansion opportunities. Tech giants like Apple and Fortinet have already capitalized on this environment, acquiring commercial sites at discounted prices to facilitate future growth.