IT Bubble Economics

08 Aug 2012

As an owner of BC real estate, one of the more frightening economic stories I’ve heard over the last year relates to how our own real estate market is in fact tied tightly to others through the mechanism of offshore investment. The story goes like this:

• The Chinese real estate market is bubbling. That is, it is appreciating because people now expect it to appreciate.
• Chinese folks in the market are thus experiencing the heady feelings Americans circa 2006 were feeling. They can purchase a property and a year later through the magic of appreciation be in possession of surplus capital to invest in yet another property.
• Canny Chinese investors invest some of their surplus capital overseas, which creates artificial demand propping up and sometimes actually inflating those overseas markets, causing smaller dependent bubbles in those markets. Think: Vancouver.
• When the Chinese bubble bursts, expect the dependent bubbles to also burst, to the surprise of the inhabitants, who attributed their good fortune to the “fundamentals” of their markets.

(Since I live in Victoria, the “fundamentals” of our market fortunately relate a lot to wealthy Canadians getting old and wanting to retire here, and happily for me there is still be a lot of that happening.)

Anyhow, IT?

The Victoria IT marketplace is surprisingly tight. We’re a government town, in the midst of a moderate fiscal belt-tightening, and yet: it’s hard to find talent. The answer? Not Victoria’s fundamentals, but a reflection of the fact that other regional IT bubbles are now, thanks to the magic of the internets, highly portable.

Check out the niche market this local consultancy is serving.

Priologic is a software development firm based in Victoria, BC, Canada focused on serving San Francisco area Fortune 100 enterprise companies.

That’s right, the IT market in San Francisco has become so tight that there is now a niche for a company near-shoring talent to the uncool kids in the Fortune 100.

We’re also seeing satellite offices for Microsoft gaming and Zynga coming to town, and Amazon has had a big foothold here for the past several years since their acquisition of AbeBooks.

We’re all swimming in the same pool, now! (Nobody pee.)