November 2009

San Francisco the Second Most "Recession-Proof" City in U.S.

According to the report: Emerging Trends in Real Estate 2010 released by PricewaterhouseCoopers LLP and the Urban Land Institute, San Francisco ranks as the second most "recession-proof" city - after Washington, D.C.

Other findings: Investors favor gateway markets on the east and west coasts, with 24-hr attributes and centers for brainpower. San Francisco was cited as a highly volatile market that bounces back quickly, and is fed by the regional tech industry.

The report also ranks San Francisco as one of the top buys for apartments, warehouses, offices and hotels. The online version of the report is accessible at www.uli.org/sitecore/content/ULI2Home/ResearchAndPublications/EmergingTrends.aspx

Source: Urban Land Institute

QB3 Mission Bay Incubator Network

The expanded QB3 Mission Bay Incubator is now operational, with quadruple the amount of space that QB3 used to operate. The Incubator is critical to the growth of the Life Sciences industry in San Francisco, providing start-up companies with access to state-of-the-art laboratory facilities and creating an environment for collaboration and innovation.

The QB3 Mission Bay Incubator Network is a public-private partnership between QB3 (California Institute of Quantitative Biosciences) and its incubator, the QB3 Garage; the City and County of San Francisco; San Francisco Center for Economic Development; San Francisco Chamber of Commerce; Fibrogen, Inc.; and Alexandria Real Estate. Together their goal is to provide start-up bioscience companies with the resources they require to bring innovations to market efficiently and with minimum capital.

The QB3 Garage and the private partners in the QB3 Mission Bay Incubator Network enable young companies to become more productive and efficient by delivering cost-effective onsite access to the intellectual and scientific resources of QB3 and UCSF, while also allowing for growth as the company's needs increase.

Source: QB3 Mission Bay Incubator Network

San Francisco Hotel Industry - August Trends

San Francisco hotel occupancy was 87.5 percent in August, bringing the overall 2009 year-to-date occupancy rate to 74.4 percent, a decrease of 5.6 percent over the same period last year. The San Francisco Average Daily Rate (ADR) for August was $148.60, and the YTD average was $154.19 - a decrease of 18.2 percent from the same period in 2008.

August hotel occupancy and the Average Daily Rate in Northern California mirrored San Francisco's, at 87.5 percent and $148.60, respectively.

Source: PKF Consulting

SF Unemployment Stays Hovering at 10 Percent

The most recent numbers reported by the California Employment Development Department peg San Francisco's unemployment rate for October 2009 at 9.9 percent, significantly higher than the October 2008 rate of 5.8 percent. Both the national and California state unemployment rates rose slightly in October, to 10.2 percent and 12.5 percent respectively. However, San Francisco's unemployment rate decreased, taking the City from 10th place, to the 8th lowest in the state, after Marin (8.1 percent), Santa Barbara (8.8 percent), Napa (9.0 percent), San Mateo (9.1 percent), San Luis Obispo (9.1 percent), Orange (9.6 percent) and Inyo (9.8 percent) counties.

Other Bay Area county unemployment rates: Sonoma 10.1 percent, Contra Costa 11.5 percent, Alameda 11.5 percent, Solano 12.0 percent and Santa Clara 11.9 percent.

Some additional California unemployment rates to note: Los Angeles (12.6 percent), Sacramento (12.6 percent) and San Diego (10.5 percent).

Source: California Employment Development Department.

UCSF, Gladstone Make Best Academic Places to Work List

UC San Francisco and the UCSF affiliated J. David Gladstone Institutes have been ranked among the top places to work in U.S. academia, according to a new survey by "The Scientist" magazine. The two San Francisco-based academic workplaces were the only two in California to rank in the top ten: UCSF ranked second, with the Gladstone Institutes coming in sixth.

According to respondents, "UCSF's two greatest strengths were its employees' overall job satisfaction and their relationships with their colleagues," while the Gladstone Institutes ranked high in infrastructure, environment, management and policies.

The Gladstone Institutes is an independent, non-profit biomedical research organization. It includes the Gladstone Institute of Cardiovascular Disease, the Gladstone Institute of Virology and Immunology and the Gladstone Institute of Neurological Disease.

Source: UCSF, Gladstone Institutes

San Francisco Beats Out New York for Investment Prospects

Seattle and San Francisco have taken the top spots for markets to watch for investment prospects. Typically New York has ranked first, but in 2009 the city slipped to fourth place behind Washington, D.C.

The news comes as a report released by the Urban Land Institute and PricewaterhouseCoopers reveals expectations that the commercial real estate market will bottom out in 2009, and flounder for much of 2010. Property prices will continue to drop, and more foreclosures and delinquencies are forecast.

Industry experts concluded that commercial real estate is facing its worst year since the 1991-92 depression, with losses of 15-20 percent projected since the mid-2007 peak.

However, there is positive news for San Francisco, as the City ranked first for development and homebuilding. And while housing prices are expected to continue their decline, the ULI/PWC report predicts that foreclosures will remain in check.

Source: Urban Land Institute

Commercial Real Estate - The Trend Continues

As we enter the final month of the year, the results of the third quarter look likely to continue into the final quarter. Commercial vacancies will continue at the same rate, tenants are delaying decisions or opting for shorter terms, and landlords are faced with continued pressure on rental rates.

According to third-quarter results from CB Richard Ellis:

• Year-to-date net absorption is a negative 1.9 million square feet
• Class A vacancy rate reached 15 percent, up from 14.7 percent the previous quarter
• Class A rental rates decreased to $34.34 per sq. foot direct rate, down from $37.12 per sq. foot the previous quarter

As evidenced by the number of renewals taking place, current market conditions--with over 11 million square feet of vacancy--provide opportunities for tenants as many landlords lower rates and adjust terms and allowances.

Source: CB Richard Ellis

28 Percent of San Francisco Homes for Sale have Slashed Prices

San Francisco ranked 27th on the list of Top 50 Cities that have slashed asking prices for homes. 28 percent of San Francisco homes have reduced sale prices, resulting in a total of $66.1 million cut over the past year.

Locally, Oakland ranked 43rd, with 23 percent of homes being offered for less, and San Jose ranked 46th, with 20 percent seeing a price cut.

Source: Marketwire

Bay Area Median Sale Price Tops Year-Ago Level for First Time Since '07

The Bay Area's housing market continued to ease back to normalcy in October. Fewer distressed properties sold, and $500,000 plus sales accounted for a greater share of transactions than a year ago. The Bay Area has now posted a modest year-over-year gain in its median sale price - the first in nearly two years.

The median sales price rose to $390,000, up 6.8 percent from September, and up 4 percent from the $375,000 seen in October 2008.

"The regional price statistics mainly reflect the fading of the foreclosures and the uptick in high-end activity in recent months," said John Walsh, MDA DataQuick president. "Down at the neighborhood level, different things are happening depending on location, but the big picture is that prices in many areas appear to be bouncing along bottom. Whether that bottom is permanent is the subject of endless debate right now."

A total of 7,933 new and resale houses and condos closed escrow in the Bay Area last month, up 0.7 percent from September, and an increase of 4.2 percent from October 2008.

Source: MDA DataQuick

San Francisco Credit Scores are the Best in the U.S.

The San Francisco metropolitan area has the highest credit ratings in the United States, and is the only Metropolitan Statistical Area (MSA) with an average score above 700. San Franciscans' average credit score is 707, while the national average is 671. Since the beginning of 2009 the West has had the highest average credit score-682-of any region in the country.

Meanwhile, credit card debt jumped 14 percent nationally between September and October.

Source: Yahoo Finance

SFO Traffic Update

A total of 3.2 million passengers passed through SFO in September - an increase of 6.2 percent from the same period last year. Total flights also increased 0.1 percent, to 31,725. International flights totaled 4,068, down 0.8 percent from September 2008, while international passenger traffic rose to 723,872, an increase of 1.2 percent. Domestic flights were up 0.3 percent to 27,657, and the total number of domestic passengers was approximately 2.5 million, an increase of 0.7 percent over 2008.

Jet Blue Airways and Virgin America have both started new flights to Fort Lauderdale, with seven new flights per week and 14 new flights per week, respectively. United Airlines will add seven new flights a week to Bozeman, Montana beginning December 17 and continuing through March 27, 2010.

Source: San Francisco International Airport

For more information please contact

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