In This Issue -- A LOOK BACK, A VIEW FORWARD -- SHORT TAKES Dear Investors and Friends: Now that we have officially “closed the book” on 2006, we can look back at a series of accomplishments, and toward a new year filled with both challenges and opportunities. 2006 marked the SFCED’s third year as the City’s private sector economic development organization. Our reach and our reputation have continued to increase year-over-year, with our website and our attendance at high-level symposia and events providing our primary introductions to potential client companies. In fact, our website attracts more than 12,000 unique visitors a year, most with a quest for direct information on locating a business in San Francisco or environs. Outreach & Milestones With the support of our 55 investors, we were able in 2006 to have direct contact with more than 300 client companies with an interest in locating or expanding their business here. Of that 300-plus group, 42 percent were domestic companies; 31 percent foreign-owned, and 27 percent already doing business here. A significant portion of these companies were from the Service, IT, Biotech, and Clean Tech sectors, ongoing areas of focus for the SFCED. This strong interest in San Francisco was borne out by 13 consecutive quarters of positive net absorption in the commercial real estate sector, a primary indicator of economic buoyancy and confidence. More than 4 million square feet were leased in 2006 – almost three Bank-of-America size buildings. While some of that absorption was from new arrivals, San Francisco iconic companies such as Blue Shield, Barclays Global, McKesson and Bain & Company renewed their leases and expanded their presence. In addition, California Pacific Medical Center, Google, the Art Institute of California, and the Gallo Institute continue to look at expansion possibilities in a market that will likely dip below the 10% vacancy factor. Certainly one of the highlights of 2006 was our participation, along with great leadership from the Mayor’s Office of Economic and Workforce Development, in finalizing the City’s first-in-memory Economic Plan. We will continue to collaborate with all parties involved – the Mayor’s Office of Economic and Workforce Development; the San Francisco Chamber of Commerce, and SPUR – to see that we remain on-course and focused on the sectors with the highest probability of major investment and success. 2006 also marked the first “Economic Summit” where the SFCED, in collaboration with the San Francisco Chamber and the Mayor’s Office, showcased the early results of the new Economic Plan. Attraction & Retention In 2007, the SFCED will focus on attraction and retention in six sectors: Biotech/Life Sciences; Media and Entertainment; Clean Green Technology; International Development; IT; and Professional Services. This is closely in-sync with the City’s Economic Plan, and will allow for further collaboration and sharing of information and market data. There were “high-fives” at Mission Bay in late 2006 when Sirna Therapeutics, one of the SFCED’s first client companies, was purchased by Merck for more than $1 billion. This once again put the spotlight on San Francisco’s leadership in the highly competitive biotechnology sector, and reinforced Mission Bay as one of the world’s leading life sciences hubs. Leadership from PG&E, a major SFCED investor, (along with passage of AB 32, the California Solar Initiative, and San Francisco’s Clean Tech Payroll Tax Exemption) has firmly placed San Francisco and California at the forefront of clean green and renewable energy technologies. In 2007, we will collaborate and build upon this industry potential, particularly in outreach to foreign companies seeking a toe-hold into the California market with its cutting-edge, sustainable technologies and favorable political climate. Last year, two SFCED international initiatives paid major dividends. After more than 18 months of effort and information exchange, the Paris Region, a major regional economic development organization, decided to locate its North American headquarters in San Francisco. In the fall, we hosted a large delegation from Wuhan, China, and were successful in partnering two San Francisco firms for work on a new central business district, one of the largest projects underway in China. New Opportunities & Challenges 2007 is off to a fast start, with work already underway with several site selectors from both the U.S. and abroad, who are looking for expansion locations for their clients. The JP Morgan life sciences conference, MacWorld, the January 23 opening of San Francisco State’s new downtown campus at Westfield Centre, along with a first-ever visit by the Queen Mary 2 in early February, reinforces the City’s economic, academic, and cultural leadership, and give us strong platforms and contacts to build upon. We can’t, and won’t, however, look at our world through rose-colored glasses. There are major challenges that could affect our economy, our image, and our attraction and retention efforts. On our radar are the 49ers, and their potential move; Virgin America, and its ongoing quest for DOT approval (and along with that, some 300 initial local jobs); anti-competitive local policies that hit both small and large employers; and the high-cost of commercial real estate development ($600-plus per square foot), which could mean a tightening of investment capital and fewer new buildings in the pipeline. However, in the economic development arena we take heart in the fact that we have a good product, a good track record, collaborative partners, and still, through it all, one of the greatest cities in the world to sell and to call home. We’re looking forward to working on your behalf, and ultimately on behalf of our entire City, toward a sound economy, job creation, and a high quality of life. Happy 2007. Dennis J. Conaghan Mayors’ Annual Economic Forecast: On January 17, the SFCED, the San Francisco Chamber of Commerce, Oakland Chamber, and SPUR will sponsor this annual confab. San Francisco Mayor Gavin Newsom and newly elected Oakland Mayor Ron Dellums will trade views on their cities and the region. The event is hosted by the San Francisco Business Times, an SFCED investor. Vietnam Airlines: The Southeast Asian carrier is seeking to expand service from the West Coast to Ho Chi Minh City. Dennis Conaghan and SFO officials are meeting with airline representatives to encourage and support a San Francisco hub, to take advantage of the burgeoning business opportunities as well as strong family travel and ties between the two regions. Paris Region Opens Doors: It’s official. The Paris Region is open for business in San Francisco. In great Parisian style, officials celebrated with fine food and wine at a major opening event on November 30 at the Westin St. Francis. Virgin America: The SFCED continues to lend support to Virgin America’s efforts to establish its U.S. hub at SFO. The DOT has denied Virgin’s application, an anticipated event, based on foreign-ownership concerns. An appeal is underway. SFCED Annual Meeting: The SFCED will hold its annual meeting in February at Lucas Arts in the Presidio. The City’s leadership in digital media will be a focus of this investor event. More details to follow. San Francisco State’s Smart Move: San Francisco State opens its downtown campus at Westfield Centre on January 23. This brings its acclaimed business programs, including MBA and Executive MBA curricula, and well established and respected continuing education programs closer to the business community and its workforce development needs. Mission Bay Action: The Mission Bay community is expecting a whole new set of customers. Old Navy is moving 800 employees into new space. Sirna Therapeutics will consolidate its South San Francisco and Colorado offices into its Mission Bay HQ by the end of the year. Lowes Enterprises has begun construction on a 275,000 square foot building. More new condos in the pipeline by AIG Global Real Estate and Bosa Development. VCs Not on the Sidelines: They’re back…investing more than $19 billion in 2006, the biggest funding boost since 2001. Software and biotechnology top their picks. SFO Update: Traffic at SFO has outpaced the national average, up over 1 percent at year-end, compared to a nationwide decrease of 1 percent. United, which handles almost 50 percent of SFO’s passenger traffic, continues to do well. UAL traffic is up 4 percent over a year ago. Jet Blue will begin service from SFO to New York and Boston in May, building on strong demand for East Coast routes and its success at Oakland International.ECONOMIC INDICATORS: Unemployment Rate: After a decrease in both San Francisco’s and California’s unemployment rate, the current numbers have San Francisco slightly up from 3.5% to 3.7% in November. Consumer Price Index (CPI)– CPI continues to rise in both San Francisco and the West region in general.
Building Permits - The latest number of building permits through November show that 2006 totals are significantly higher than 2005 totals. Even without December totals, 2006 is 21% higher than the previous year totals. Commercial Real Estate - San Francisco’s Class A vacancy market continues to tighten. The overall percentage currently stand at an 11.4% vacancy rate with asking rates on Class A property up to $39 per square foot. |
