How Will 2019 IPOs Affect The Housing Market?

November 5, 2019

One of the most talked about subjects in the office is how projected 2019 IPO activity will affect San Francisco’s housing market. Most agents anticipate a groundswell of new buyers ready to invest in local property, and are advising existing buyer clients to act quickly in the hopes of beating post-IPO buyers to the punchline. This momentum would obviously benefit sellers, as increased demand means rising property values. Simple, right?

As the San Francisco Chronicle reported on Tuesday, the picture is slightly more complicated. First of all, most companies enforce a “lockup period” of six months post-IPO in which employees cannot sell their shares. Oftentimes, by the end of that period, the stock values of those companies fall considerably, giving holders less buying power. Another limiting factor is the lack of historical data for San Francisco. The most popular subject in recent studies of post-IPO effects on the housing market is Facebook — which went public in 2012 — but the findings are mostly relevant to Menlo Park and surrounding towns.

However, there is enough to suggest significant increases in the city as well. The consensus of these studies is that IPOs increase property values by at least 3-4% in nearby areas, most of all among high value properties within a two-mile radius of the company’s headquarters. If we consider the map below, it is clear that five of the companies expected to IPO this year — Uber, Lyft, Slack, Airbnb and Instacart — are in close proximity of desirable San Francisco neighborhoods. When you consider that “managers and workers for those young firms tend to live closer” to headquarters than people working for older companies, as observed by an associate business professor at Penn State, the signs are positive for the San Francisco market. It will be particularly interesting to see the effects in SoMa, where most of the companies under consideration are concentrated.

Map of HQs of companies expected to IPO in 2019.