San Francisco Center for Economic Development

January 2011

INNOVATION: The Word of “Today”

President Obama’s State of the Union speech last week had major portions dedicated to revitalizing the economy, and specifically re-engaging the spirit of innovation that has been the economic engine of the US for the last 100 years.

Over the last months, the SFCED in our own, local way, has been working diligently with the Governor’s Office of Economic Development (GoEd) on an innovation strategy for California, built around iHubs in various areas of the state. San Francisco competed for, and won, the iHub designation for biotechnology.

The Greater Mission Bay Area Biotech iHub serves as a platform for coordinating innovative business creation, recruitment and strategic initiatives throughout the San Francisco Bay Area. The goal is to focus and support the continuing growth and success of the biotech industry at Mission Bay, the largest and most sophisticated life sciences cluster in the United States. Our aspirations are global: to make San Francisco the undisputed world-leader in this sector.

The British American Chamber of Commerce’s Transatlantic Conference will be held in San Francisco in May around the theme of Innovation. The SFCED is assisting with assembling world leaders from the biotech sector, including Reg Kelly of QB3, who will address C-level executives from global organizations, and high-level government officials from London and Washington.

In 2011, we continue to focus on job creation and retention in our core sectors, which hold the promise of leading us into a sustainable economic recovery. In addition to Life Sciences/Biotech, these sectors are Clean Technology, Digital Media, and Information Technology.


Unemployment

Year-end unemployment rates for 2010 show significant improvement in particular counties. San Francisco is among those counties that made the largest strides in decreasing its unemployment rate in recent weeks. November to December unemployment rates in San Francisco decreased by 0.4 percent—standing now at 9.2 percent. This is an overall 0.2 percent improvement over December 2009. Positive recovery trends continue as many counties are making slow but consistent improvement in employment rates. California’s unadjusted unemployment rates still stand in the double digits but have stabilized after a steady 4th quarter climb. As of December 2010, statewide unemployment is listed at 12.3 percent. Other California counties' unemployment rates: Los Angeles 12.7 percent, Orange County 8.9 percent, San Diego 10.1 percent, and Imperial 28 percent—the highest in the State.

Bay Area Unadjusted Unemployment Rates, December 2010

County

Dec-10

Nov-10

Dec-09

Alameda

10.8%

11.2%

11.0%

Contra Costa

10.9%

11.2%

11.1%

Marin*

7.9%

8.3%

8.2%

Napa

10.6%

10.0%

10.2%

San Francisco

9.2%

9.6%

9.4%

San Mateo

8.3%

9.7%

8.9%

Santa Clara

10.4%

10.8%

11.3%

Solano

12.1%

12.1%

11.8%

Sonoma

10.0%

10.1%

10.3%

*Lowest in State

Source: CAL-EDD

Historical Unemployment – San Francisco, CA, USA – Through December 2010

Source: Cal EDD, BLS


Commercial Real Estate

As we look back on the final statistics for 2010, there are a number of conflicting views on commercial real estate. While the year ended with a negative absorption of 800,000—a significant reduction from the more than 2 million-plus square ft citywide at year-end of 2009—there was positive absorption in the third quarter and a reduced negative absorption in the fourth quarter of 82,000 square ft.

What does this tell us as we close 2010 and look forward to 2011? Rental rates and occupancy in 2009 vs 2010 in the Central Business District (CBD) remained about the same, while the non-CBD saw vacancy spike close to 20 percent.

2011 finds owners being cautiously optimistic as they see an improvement in vacancy and rental rates. As the year progresses we will continue to see some tenants downsizing their space requirements with the same number of employees and a reduction in free rent and tenant allowances. Market expansion will be dominated by the by the tech sector—as well as reduced availability of large blocks of space and an increase in tenant demand. It still, however, remains a tenant market with an overall vacancy rate of 15.2 percent and 11 million square ft of empty space.

Office Space San Francisco County 4th Quarter 2010

Net Rentable area

Total Vacancy %

Avg Class A Direct Asking Rate

NOMA Financial District

25,995,252

15.2%

$39.31

SOMA Financial District

23,162,801

10.2%

$39.58

Non-CBD Total

25,539,069

19.7%

$28.61

San Francisco Total

74,697,122

15.2%

$37.92

Source: Cushman & Wakefield


Commercial Real Estate Acquisitions

A recent survey of subscribers to Real Estate Forum revealed plans for more aggressive, though still selective, acquisition strategies in 2011. Compared to six months ago the respondents indicated that the current commercial real estate investment climate is as follows:

More Competitive: 59%

Unchanged: 32%

Less Competitive: 8%

Source: Real Estate Forum  


San Francisco Housing

Bay Area home sales ended 2010 with little sense of direction, as prices showed slight decreases and sales were slow. Overall trends continue to be dominated by distress sales and bargain hunting, with discretionary and move-up buying on hold.

A total of 7,178 new and resale houses and condos were sold in the nine-county Bay Area last month. This is up 17.5 percent from 6,111 in November and down 8.3 percent from 7,828 in December 2009.

Last month foreclosure resales—homes that had been foreclosed on in the prior 12 months—rose for the fifth consecutive month to 30.8 percent of the Bay Area’s resale market—the highest since last March. December’s figure was up from 28.6 percent in November, but down from 32.0 percent in December 2009. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 15 years is about 8 percent.

Last month absentee buyers, mostly investors, purchased 18.7 percent of all Bay Area homes sold, compared with 17.0 percent in November and 17.9 percent a year ago. The monthly average since 1988 is 16.5 percent.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards, though below peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above average.

 
Sales Volume
Median Price

All homes

Dec-09

Dec-10

%Chng

Dec-09

Dec-10

%Chng

Alameda         

1,552

1,516

-2.3%

$360,000

$347,000

-3.6%

Contra Costa   

1,634

1,488

-8.9%

$287,500

$265,000

-7.8%

Marin          

265

226

-14.7%

$635,000

$599,000

-5.7%

Napa            

128

134

4.7%

$356,000

$310,000

-12.9%

Santa Clara     

1,915

1,646

-14.0%

$475,000

$460,000

-3.2%

San Francisco   

499

491

-1.6%

$650,000

$617,000

-5.1%

San Mateo       

642

616

-4.0%

$586,500

$560,000

-4.5%

Solano         

698

601

-13.9%

$217,500

$198,000

-9.0%

Sonoma          

495

460

-7.1%

$330,000

$310,000

-6.1%

Bay Area       

7,828

7,178

-8.3%

$380,000

$375,000

-1.3%

Source: DQ News


Improving Residential Market

San Francisco was rated the number-one city for residential real estate investment in 2011. The top five markets expected to thrive in 2011:

  1. San Francisco, CA
  2. Austin, TX
  3. Madison, WI
  4. Raleigh-Durham, NC
  5. San Antonio, TX

Source: Trulia


SFO Airport Activity

Airport Activity (SFO)

Nov-10

Nov-09

% change M-M

% change YTD

Total Passengers

3,172,057

2,979,513

6.5%

5.4

Domestic

2,501,088

2,354,389

6.2%

4.9%

International

654,173

609,057

7.4%

6.6%

Flight Operations –
Total

31,556

30,406

3.8%

2.0%

2010 saw a steady increase in both Domestic and International flight activity. International flights have shown the largest signs of increase while general flight operations (non-passenger) have shown the least percentage growth year-to-date.

For the fifth time in the past eight years, the readers of Business Traveler Germany magazine have rated San Francisco International Airport as the Best Airport in North America.

According to the survey, magazine readers said they valued SFO’s efficient and easily-navigated facilities with excellent accessibility whether via public transit, ground transportation or highway systems.

Source: FlySFO


Factoid

Cities with the highest use of Twitter by business people:

  1. New York
  2. San Francisco

Source: Comstocks

 

QuickFacts is produced by the San Francisco Center for Economic Development (www.sfced.org). For more information please contact:

Dennis Conaghan
Executive Director
415.352.8819
Email: dconaghan@sfced.org
www.sfced.org