In This Issue

SFCED UPDATES

2007 continues at a brisk pace.  By the numbers alone, we have experienced positive activity in all categories:

  • More than 1500 inquiries
  • Positive contact with 377 firms (75 percent domestic)
  • Our website is a critical nexus – more than 77 percent of inquiries generated are from www.sfced.org, up from 40 percent a year ago.

Current, active job creation in the pipeline includes:

  • Our two-year courtship with a German solar tech firm is coming to fruition. An announcement will be made soon.
  • Collaboration with SF State on attraction of a major digital media company continues.
  • We are engaged in active, serious discussions with an Australian medical device company and a New Zealand-based digital media company.
  • A domestic marketing firm is set to announce an SF location, bringing 30 to 50 new jobs.

Outreach and collaboration continues on many fronts.  A few highlights:

  • SFCED will participate in three important symposia and conferences in the fall, including Solar 2007, highlighting SF’s leadership in clean technology; CoreNet, the major international conference of site selectors and real estate professionals; and Gene Acres, a major life sciences confab.
  • We organized meetings and business development opportunities for local companies with a Tieling, China wind technology purchasing delegation.  Several positive outcomes reported. Currently we are working with a delegation from Wuhan China scheduled to visit in the fall.
  • Ongoing outreach and collaboration with business development entities, providing us with strong business leads and opportunities for partnerships: Hong Kong Trade Council, Chinese Consulate’s Commerce group; Paris Region, Think London, and German American Chamber of Commerce among the most active.
  • Participated in German California Solar Day, to market SF’s leadership in clean tech sector.  Subsequently, Germany’s foreign minister participated in discussions and meetings with Bay Area executives during his visit in late August to highlight Germany’s desire for partnership with California’s business and political leaders.

UPCOMING EVENTS

Are You Leaving Money on the Table?
Please join us on Thursday, September 27 from 8:00 a.m. - 9:30 a.m. in the Chamber Board Room to find out if your company or your clients can benefit from the California Enterprise Zone Program. San Francisco’s Enterprise Zone boundaries have changed and expanded. Your company may qualify for valuable tax credits, in some cases worth more than $30,000 per employee plus other incentives! David Tierney, one of the California’s foremost experts on Enterprise Zone incentives, will discuss the ins, outs, and benefits of this often underutilized program. Space is limited, please RSVP to Clementine Ntshaykolo at cntshaykolo@sfced.org or call 415-352-8853.

City Summit on Climate Challenge
The San Francisco Chamber of Commerce, in partnership with The Mayor’s Office and the Department of the Environment, invite you to attend City Summit: Leveraging Business Ingenuity To Meet The Climate Challenge. This event will be held on Monday, September 10, at the Mission Bay Conference Center from 8:00 a.m. - 12:15 p.m. Keynote speakers Lt. Governor John Garamendi, San Francisco Mayor Gavin Newsom, and chair of the California Air Resources Board, Mary Nichols will discuss:

  • Business-to-business education
  • Recommended steps business can take
  • An action agenda to pursue policies that can lead to business solutions

For more information, visit www.sfchamber.com/citysummit or call 415-352-8858.

San Francisco Regional Forecast Conference- Beacon Economics and the Bay Area Economic Forum will present a San Francisco Economic Forecast conference on Tuesday, September 18, at the Hyatt Regency from 8:00 a.m. - 10:30 a.m. For information or registration please visit www.beaconecon.com or call 415-595-6513.

Commercial Real Estate Update

Many factors influence the commercial real estate market. In fact, if you follow the NASDAQ over a 10-year period you will find an amazing similarity to commercial real estate trends. Consequently, the commercial real estate market in San Francisco could experience some adjustment due to uncertainty in the housing and capital markets. Following 16 consecutive quarters of positive absorption, leasing activity continues at a slower pace followed by rising rents. Rental rates continue their climb as new owners push to recover costs from recent purchases. Close to 60% of buildings in the Financial District have been sold in the last two years, and several buildings have sold more than once.

Sales of existing buildings have remained strong in 2007, with more than $6 billion in sales occurring in the first half of the year at prices exceeding $500 per square foot. Significant activity included Equity Office Properties’ portfolio sale to Blackstone and in turn, Blackstone’s sale of their new portfolio to Morgan Stanley (including ownership of 50% of One Market.)

Rental rates in the Class A category average $45.05 per square foot (prime view) according to Cushman & Wakefield. The “Tier One” market disparity is caused by a few of the $100.00 per square foot prime location transactions, while other locations in the same building may have space in the $40 range.

Occupancy rates continue to climb, with 8% vacancy rate in the Central Business District Class A category, and 11% vacancy rate citywide. Pressure on the Class A high-end space from both a rental and an occupancy perspective continues. Even with all of the market forces, over seven million square feet of available space remains on the market.

Residential Real Estate Update

Sales of existing homes in California were down 32.8% from June 2006 to June 2007, making June 2007 the slowest sales month for California real estate since 1995. A larger inventory of homes for sale is hurting entry-level sales and those in outlying areas, according to DataQuick.

In San Francisco, however, the outlook is more positive. Listed housing inventory in the city dipped slightly (4.5%) over the past two weeks, in a typical pre-Labor Day slowdown and is currently running just 3.1% (or 36 listings) below 2006 levels. The average listing price was more than 13% lower than the previous month but more than 7.8% higher than a year ago. However, the average selling price was almost 107% of the average listing price.

Transbay Terminal

Excitement and commentary are plentiful, as the three proposals for the new San Francisco Transbay Terminal Project, set to be completed by 2014, are vetted and discussed. The Transbay Authority is scheduled to vote to select the development team on September 20.

Retail

The San Francisco retail market continues to expand with new store openings and prospective projects.  City Place, a project of Urban Realty and Common Fund Realty Inc., a 250,000 square foot project between 5th and 6th, is in the planning stage. This project, west of the new Westfield San Francisco Centre, will contribute to the revitalization of Market Street. Completion is estimated for mid 2010.
Barneys New York opens its new store at the corner of Stockton and O’Farrell on September 19, while Gap reports that its store at 4th and Market is the highest grossing store after Manhattan.

SFO News

Activities
SFO passenger traffic continues to show strength. Total passenger volume in the first half of 2007 showed an increase of 4.7% compared to the same period last year, while traffic for the month of June was up 6.3% over the same period in 2006. International flights were up by 2.6% in June, and are expected to continue to increase with the anticipated expansion of a number of international airline routes, including United’s plan to add nonstop service from SFO to the Guangzhou area in 2008.
Virgin America Airlines Virgin America began flights from SFO on August 8, 2007. The locally-based airline’s initial flights serve JFK and LA. Service to Las Vegas will begin October 10, 2007, while other destinations are expected soon.
Southwest Airlines
SFO welcomed Southwest Airlines flights August 26, 2007. Initial service includes Chicago, San Diego and Las Vegas with 18 daily flights and additional destinations planned.

General Economy

Bay Area’s ‘clean tech’ boom
San Francisco’s propensity to be on the cutting edge of new technology, combined with an eco-conscious workforce, position The City to capitalize on the rapidly developing “clean tech” industry. According to Sustainlane.com, San Francisco is the second “greenest” city in the US, and has seen “particular success in the development of solar energy, recycling and large-scale composting, integrated waste management, bike transportation, green buildings, and local food systems.”

A few indications of the growing opportunities and rapid development of this sector include:

  • Roughly 25% of the $2.9 billion of venture capital cash that was invested in “clean tech” last year went to Bay Area companies, according to Cleantech Group LLC.
  • A report by the Bay Area Science and Innovation Consortium notes that Bay Area research into lithium ion batteries -- seen as key to growing the hybrid-electric car market -- gives the region's researchers and entrepreneurs a good base for setting up a network with Asian companies that make many hybrid vehicle batteries.

Economic Indicators

UNEMPLOYMENT
Despite the uncertainty of the housing market, tightening of the credit marketing and overall unpredictable state of our national economic health, San Francisco’s unemployment is only up 0.2% from 4.4% in June to 4.6% in July. Despite the new increase, San Francisco’s unemployment rate is still proportionally lower than California’s overall unemployment rate of 5.3%.

Employment by Sector San Francisco, Marin & San Mateo Counties

The biggest source of employment in San Francisco is the Professional & Business Services sector, followed by the Trade, Transportation & Utilities sector, the Government sector, the Leisure & Hospitality sector, and Education & Health Services sector.  

Change in CPI

This graph reflects the change in CPI (a measure of inflation) bimonthly over the past few years. The line for the Bay Area has been bolded to show how stable the CPI has been compared to other cities and the US itself.

HOME SALES

Despite the mortgage crisis affecting most cities, San Francisco’s home sales for July is 4.10% higher than it was in 2006. The median home price has also increased from 2006 by 3.10% in 2007.

TOURISM

New Hotel going up in SoMa

London's InterContinental Hotels Group - the largest hotel chain in the world by number of rooms, is building a $195 million hotel at Fifth and Howard. The new hotel scheduled for completion in February 2008 will add 550 more rooms to San Francisco’s inventory of 32,000 rooms. Occupancy rates and room charges in San Francisco hotels have bounced back from the doldrums early this decade, when about 60% of rooms were filled. San Francisco hotels filled 81.1% of their rooms in June 2007, according to PKF Consulting. That's an increase of 0.7% from June 2006.

San Francisco Tops Travel & Leisure rankings

Travel & Leisure’s World’s Best Awards readers’ survey ranked San Francisco the #2 city in the US and Canada and the #9 city in the world. San Francisco has been ranked in the #1 or #2 spot on the list of Top Cities in the US and Canada for the past 12 years.

[1] San Francisco Chronicle, August 25, 2007
[1] SFCVB Website

The Leisure & hospitality industry has seen growth in the first half of the year. The rejuvenation of tourism translates to job creation within the industry and across the whole economy.