In This Issue

SFCED UPDATES

Investor Survey Results

The results of a phone and online survey of SFCED investors and potential investors, conducted by SF State graduate business students, are in. The results indicate broad support for the mission and direction of the SFCED, including the critical need for a private-sector effort. Respondents also believe there is a need for broader financial support in order to increase visibility and staffing.

The SFCED will incorporate the valuable and insightful comments from those surveyed into our 2008 – 2009 work plans.

Launch of New SFCED Website

The SFCED website is a major source of information for site selectors and consultants, and receives more than 1,000 unique “hits” per month. In keeping with our goal to be the number-one source of information on doing business in San Francisco, we will launch a new website with enhanced content and usability during the first quarter of 2008. Quinn Interactive, a San Francisco web design firm, has lent their considerable talents and time to this project. We thank them and will keep you informed on our “go live” date.

Programs and Events

  • Wuhan China Round Table: Consistent with our objective of providing new business opportunities to existing San Francisco companies, and particularly SFCED investors, we recently hosted an information session presented by the government of Wuhan, China, a dynamic and growing logistics center with a population of 8.5 million. As a result of this effort, a major San Francisco-based logistics company established strategic contacts with members of the delegation with whom they will meet again during an upcoming China visit.

  • Enterprise Tax Zone Seminar: Did you know that most of the downtown business district is now included in the newly realigned tax credit zone? In September, the SFCED hosted an information seminar describing the potential opportunities available to San Francisco business. For more detailed information please visit our website www.sfced.org under “Locate or Start Up in SF” to find detailed Enterprise Tax Zone information.

  • SFCED Investor Forum: More than 30 SFCED investors attended our forum in September, hosted by Bob Brant and City National Bank. Brant offered City National’s view of the economy, including the fact that Northern California is holding up better than other parts of the State, even considering the sub-prime mortgage meltdown. Investors received an update on SFCED activities and heard from Joaquin Alvarado, director of SF State’s Institute for Next Generation Internet, on the current status and future evolution of IT and digital media.

Outreach and Collaboration

SOLAR 2007 provided the opportunity to meet with two solar firms who have located or plan to locate in San Francisco, and several other companies that are considering an SF location.

The BIOMEDevice conference enabled us to establish contact with more than 30 medical device firms who have established operations in San Francisco. This growing field is an outgrowth of our successful attraction efforts in biotechnology and life sciences.

CoreNet Global Summit provided the SFCED with the opportunity to collaborate with TeamCalifornia to represent the State and Bay Area Region among the conference’s important global audience, comprised of site selectors, business consultants and corporate real estate executives.

We continue our aggressive outreach and collaboration with business development entities that provide the SFCED with strong business leads and opportunities for partnerships. We are actively working with the Hong Kong Trade Council, VCs (notably in the Clean Tech arena), various consulates and their trade officers, US Commercial Services, the Bay Area Marketing Partnership, TEAMCALIFORNIA and SPUR.

Commercial Real Estate Update

According to a recent report from SFCED investor Cushman & Wakefield, San Francisco has experienced its 17th consecutive quarter of positive absorption. The market, while exposed to downward economic pressures and exhibiting some slowing in the third quarter, seems to be withstanding basic economic challenges, and has been bolstered by the growth of existing firms and in the technology sector. Notable transactions during the third quarter include Salesforce.com, Visa International, Bloomberg News, Stockbridge, Wells Fargo and Wide Orbit.

Rental rates: Despite upward pressure by owners who have purchased buildings in the last two years, rates seem to be leveling off. Rates in Class A buildings in the North of Market Financial District are in the $50 per square foot range and higher (depending upon the view), while non-view space and Class B buildings rates are in the mid $30s to high $40s. South of Market rental rates for Class A space are in the $45 range, with Class B space in the mid $30s. The Citywide market is very close to the $40 mark.

Vacancy rates: Citywide vacancy rates dropped to less than 10%, while North of Market Financial District Class A space dropped to 9%, versus 10.3% in the previous quarter. South of Market Class A space vacancy is at 7%.

Mission Bay

Alexandria, the major life sciences developer at Mission Bay, has broadened its marketing strategy beyond the life sciences to include information technology firms. The former Alexandria Center for Life Sciences will be renamed the Alexandria Center for Science and Technology. This expansion will have a profound impact on the future of San Francisco and Mission Bay by increasing the offering of commercial space to include both life sciences and technology. Alexandria plans a 165,000-square-foot building set for completion in late 2008; while another 305,0000-square foot building is in the advanced planning stage.

Retail

San Francisco is the second strongest retail market in the country. Spurred by the opening of Barney’s new location at Stockton and O'Farrell Streets, other retailers are rushing to get in on the action. The recent flurry of activity includes De Beers fine jewelry, which will open at Post and Grant Streets this winter; Prada, the couture clothier, which will move from Geary Street to larger quarters in the former Brooks Brothers building on Post Street after the first of the year; and designer Helmut Lang, who has plans for a luxury boutique on Maiden Lane. Strong fundamentals and limited competition from new development are driving investor demand for San Francisco’s retail.

SFO News

San Francisco International Airport carriers have continued to increase service in 2007 with expansion plans for 2008. Air Lingus began direct, non-stop service to Dublin in October and Cathy Pacific added a second daily flight to Hong Kong. In 2008, United Airlines will begin direct flights to Guangzhou, China and Air India and Kingfisher will both begin flights to India.

On the low-cost domestic carrier front 2007 saw the addition of JetBlue Airways, Southwest Airlines and Virgin America, who all continue to add new flights. Virgin America will begin flights to San Diego in February 2008.

Traffic at SFO continued to increase over 2006 through October 2007, with total volume growth of 5.7% and international growth of 5.0%.

General Economy

If you had any doubts, Cleantech is the place to be, as recent data indicate that sustainability is becoming a mainstream practice. A survey of more than 400 real estate industry executives indicated:

  • 79% view sustainability as very important to their business today or within the next two years
  • 77% are willing to pay a premium for sustainability
  • 80% have incorporated sustainable design into recent corporate building or renovation projects

Economic Indicators

Residential Real Estate Update

Home prices have fallen for the eighth consecutive month. In the State of California alone, the total number of homes sold thus far has fallen by 40.2% in October compared to a year ago. San Francisco’s median home price has gone up, despite the national trend of falling prices. Home prices in San Francisco have increased by 3.9% from $765,000 in October 2006 to $795,000 in October 2007; due to a greater number of more-expensive homes having sold.[1]. According to Dataquick, the Bay Area counties that are experiencing the most significant mortgage problems are Alameda, Solano and Sonoma where home prices have declined by 3.0%, 15.6% and 9.0%, respectively. Statewide some of the most vulnerable areas are the Central Valley, San Diego and Orange County.


Source: DataQuick Information Systems, www.DQNews.com, October 2007



Employment by Sector

A breakdown of employment by industries indicates that the Bay Area’s workforce is concentrated in the professional services, trade, transportation and utilities, government, educational and health services, and leisure and hospitality sectors.


Source: CA Employment Development Department, October 2007


CPI

Consumer Price Index-(a measure of inflation) the graph reflects the changes in CPI in the Bay area, LA, NY and nationally.


Source: Bureau of Labor & Statistics, October 2007



UNEMPLOYMENT

Amid the economic uncertainties that continue, unemployment in San Francisco is up slightly by 0.6%, to 4.4% compared to 3.8% the same time in 2006. Despite the increase, San Francisco’s unemployment rate is still lower than the State as a whole, with a rate of 5.4%.


Source: CA Employment development Department, October 2007; Bureau of Labor & Statistics



TOURISM

Despite the national decline in tourism, San Francisco has been able to attract regional, national and foreign tourists as illustrated in the hotel occupancy data. Hotel occupancy was down by 4.4% from August 2005 to August 2006; but is up by 5.82% in August 2007 compared with August 2006.


Source: PTK Consulting 2007




Source: PTK Consulting 2007