I once heard a story that Disney spent twenty years and several billion dollars on developing Celebration and made about as much money as one of their third tier animated movies...something in the 100 million dollar range. Which may or may not be true, but it does accurately portray the long time horizons of real-estate (e.g. thirty year mortgages) and the relatively low returns compared to startups.

For a VC firm the real-estate market and rising rents have a limited effect on the success of their investment portfolio and the returns from real-estate don't justify investing money that could otherwise be put into their core business of investing in startups. A $100,000,000 can fund a lot of startups. It's not going to buy a sound diversified portfolio of San Francisco office properties.