SAN JOSE — “Stagnation” in commercial real estate has hobbled growth in assessed values for Santa Clara County real estate, producing the smallest rate of increase in more than a decade, a new report states.

Though the annual assessment roll for the county did manage to reach an all-time high of $725.7 billion, the 4.15% increase marked the slowest annual increase in combined values since 2012, the county assessor’s office reported.

“The stagnation was largely due to ongoing challenges in the commercial real estate market,” the Santa Clara County assessor’s office stated.

Waves of slumping values, loan delinquencies and foreclosures have haunted hotels, office buildings, apartment complexes and even vacant land throughout the Bay Area, including Santa Clara County.

“Our weakening property assessments are concerning because so much of our public revenues are pegged to the assessments,” said Russell Hancock, president of San Jose-based think tank Joint Venture Silicon Valley. “If this becomes a long-term trend, then we’re in for some painful trade-offs and the reduction of public services.”

The latest values included in the fiscal 2026 report marked the first time the assessment roll topped $700 billion. The prior year’s fiscal 2025 report disclosed an assessment roll with an aggregate value of $696.79 billion.

“An increasing number of office buildings are selling for less than assessed value, and foreclosures from delinquent loans are becoming more frequent,” the county assessor’s office stated.

The real estate value slump has prompted commercial owners to seek relief in their property tax costs by appealing the valuations of the parcels they hold.

An estimated 98% of the $145 billion of assessed value under appeal is commercial property, according to Santa Clara County Assessor Larry Stone, who recently announced his retirement.

“We expect to receive a greater number of commercial property assessment appeals filed this year, which may result in assessment roll corrections reducing the value of the assessment roll,” Stone said.

Making matters worse, some developers have slowed or scrapped numerous projects that were expected to redevelop existing sites and produce higher values.

Reduced property sales and value, along with the sluggish pace of new construction, could coalesce to curb growth in assessment rolls in the next few years.

“The long-term outlook for the region is good,” the assessor’s office stated.

“With 80% of all tech research and development occurring in Silicon Valley and the headquarters of three trillion-dollar companies — Apple, Microsoft, and Nvidia — the global attraction of the region will not change anytime soon.”

Hancock believes that it would be unwise to use the slow growth in property values to draw a conclusion that Silicon Valley has started to fail in a fundamental way.

“Do these weakening values indicate there’s something wrong with Silicon Valley? That would be the wrong conclusion,” Hancock said. “External forces are driving this.”

Outside factors include the lingering economic aftereffects of COVID-19 along with uncertainties over an array of federal government policies.

“The pandemic blew up commercial real estate markets, and now we’re living with a new reality,” Hancock said.

Offices, shops, hotels, public gatherings, and business travel have been permanently altered, in Hancock’s view.

“Those kinds of properties won’t recapture their value, Hancock said.