The South Bay Economy: What to Know for Business Success in 2025
Bridge Bank, a division of Western Alliance Bank, is the presenting sponsor of the San José State University Economic Summit, an annual event that brings together business and community leaders from South Bay and Santa Clara Valley to gain insight on the current economic climate and how it may affect businesses in Northern California and beyond.
Here, we share key takeaways from the 2025 South Bay Regional Intelligence Report. In a nutshell: While job losses and the tight housing market continue to present challenges, venture capital (VC) funding rebounded to record highs in 2024, sowing the seeds of the next growth cycle in tech.
VC investment and the AI boom
With the AI boom as a driving force, VC funding in Santa Clara County reached a new high of $18.7 billion in 2024, higher than the record $17.3 billion set in 2021 and a 61% increase from 2023. Santa Clara County and Greater Silicon Valley accounted for 52% of U.S. VC funding in 2024, the region’s highest share on record.
Employment and labor
The South Bay economy has faced strong headwinds over the past two and a half years, with continued job losses driven by declines in tech and computer manufacturing. But as demand for workers has begun to grow again, wages in the South Bay increased significantly over the past year. Average annual wages in the region rose to $179,589, a 12.9% increase from Q3 2023 to Q3 2024. Wage growth in the South Bay outshone the East Bay (2.6%), Stockton (5.9%), San Francisco (MD) (5.5%), California (5.1%) and the United States overall (4.5%).
The most robust wage growth was in the natural resources and construction sector, at 27.1%. Overall wage growth was strongest in high-wage sectors, with significant gains in professional and business services (22.9%), information (22.4%) and manufacturing (18.4%).
Residential and commercial real estate
The housing shortage remains a core issue. Home sales continue to decline as home prices in the South Bay rise, despite high mortgage rates and limited inventory. The average 30-year fixed mortgage rate is down from its peak in October 2023, reaching 6.7% in March 2025, but remains well above pre-pandemic levels. The lack of housing availability dampens business and job growth across California.
The tech-sector slowdown has hurt demand in the San Jose office market, resulting in higher office vacancies over the past year. Office vacancies in the South Bay region reached 26% in the fourth quarter of 2024, a regional record and the fifth-highest in the nation. For comparison, San Francisco reported a 22.8% vacancy rate, and the vacancy rate in the East Bay is at 20.7%.
To learn more, download a copy of the South Bay Regional Intelligence Report. To discuss how your business can succeed in any economic climate, please reach out to your Western Alliance Bank relationship manager — we are always here to help.
Western Alliance Bank
With more than $85 billion in assets, Western Alliance Bancorporation is one of the country’s top-performing banking companies. Its primary subsidiary, Western Alliance Bank, Member FDIC, offers a full spectrum of tailored commercial banking solutions and consumer products, all delivered with outstanding service by banking and mortgage experts who put customers first. Major accolades include being ranked as a top U.S. bank in 2024 by American Banker and Bank Director and receiving #1 rankings on Extel’s (formerly Institutional Investor’s) All-America Executive Team Midcap Banks 2024 for Best CEO, Best CFO and Best Company Board of Directors. Serving clients across the country wherever business happens, Western Alliance Bank operates individual, full-service banking and financial brands with offices in key markets nationwide.
