May - June 2009

Unemployment Up; SF Betters State and National Averages

Unemployment rates continue to climb, and have doubled over their levels of a year ago. In April, rates were pegged at the following levels: National, 8.9 percent; California, 10.9 percent; San Francisco, 8.8 percent. San Francisco's rate is the ninth lowest in the state. Other Bay Area counties report as follows: Alameda, 10.3 percent; Contra Costa, 9.7 percent; Santa Clara,10.9 percent; Solano, 10.5 percent; Napa, 8.5 percent; San Mateo, 8.1 percent; Marin, 7.2 percent; and Sonoma, 9.4 percent. Looking South, Los Angeles reported in at 10.7, and Orange County at 8.3 percent.

By contrast, in April 2008 San Francisco reported a rate of 4.3 percent, with the statewide level at 6 percent.

Bay Area in Top Three for Life Sciences

Information from the Milken Institute indicates that the Bay Area ranks in the top three regions nationally at sustaining and building value in the life sciences. The Bay Area is also well positioned to benefit from federal policy and stimulus initiatives.

In the overall composite index ranking-which includes factors such as development capacity, output, workforce and investment-the Bay Area is ranked third, behind Boston and Philadelphia, and ahead of Los Angeles and San Diego, which rank sixth and eighth, respectively.

In specific rankings, Milken pegs the Bay Area second behind Boston for our Innovation Pipeline; a very close second to Boston for Risk Capital; and as a clear number-one for our Life Sciences Workforce.

The strength of the Bay Area life sciences cluster promises to be a major factor in helping the region weather the current economic downturn.

SF Home Sales Down; Prices Hold Up Better than Region

According to MOA DataQuick, Bay Area homes are selling at a rapid pace in the region's lower-cost areas, with an increase of 13.1 percent over April 2008 volumes. The same can't be said for San Francisco.

With 402 units sold, San Francisco experienced the region's largest decrease in residential activity, down 33 percent from April 2008 volumes. Median pricing also took a dive, dropping by 16 percent over a year ago, to $628,500 from $750,000. However, San Francisco's decrease is dwarfed by the Bay Area median free fall-down by 41 percent over a year ago, from $518,000 to $304,000.

Specific county data show median home price declines as follows:
Alameda, 39 percent; Contra Costa, 43 percent; Marin, 27 percent; Napa, 36 percent; Santa Clara, 34 percent; San Mateo, 23 percent; Solano, 43 percent; and Sonoma, 30 percent.

Commercial Rates Continue Decline

San Francisco's mid-second-quarter 2009 commercial real estate data continue to reflect the uncertainty of the economy. Market transactions remain slow, while downward pressure on rental rates continues and space availability increases, as more sublease and direct space are added.

Class A space at mid-quarter has a 13.8 percent vacancy factor, with asking rates decreasing 10.6 percent since the fourth quarter of 2008, as reported by CB Richard Ellis. Sublease space increased by 107,000 square feet during the last six weeks, representing 23 percent of available Class A space-the highest percentage since fourth quarter 2004. Asking rates for Class A space have decreased to $38.91 per square foot, compared to prices in the mid-to-high $40s in 2008.

The uncertainty will continue, as loans mature and properties that were financed with mortgage-backed securities experience difficulty refinancing.

SFO Adds Flights

A vital component to the Bay Area's economic engine is the availability of flights and services provided by San Francisco International Airport. SFO's international terminal recently was named best in the nation by Dwell, a premier design magazine. While March domestic traffic was off 5 percent, and international traffic down 18 percent, SFO has been able to continue to add new flights. During May, Emirates, Jet Blue, Air Tran and Southwest have expanded service.

Paris Region Offers New "Hub" for Tech Companies

More than three years ago, the SFCED helped the Paris Region's economic development arm (PRIME) locate in San Francisco. Now PRIME is offering a new service, Hubtech 21, which helps European technology companies establish a presence in the US on a fast-track basis. With a focus on life sciences, optics/photonics and software sectors, Hubtech will have its second North American operation in San Francisco. Its first "hub" was located in Boston, where it has helped 25 European technology companies since 2003.

For more information please contact

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