Bay Area Job Markets
Commercial Real Estate
Conclusions
The
Cities of
Alameda
Antioch
Albany
Berkeley
Brentwood
Dublin
Emeryville
Fremont
Hayward
Livermore
Newark
Oakland
Oakley
Piedmont
Pittsburg
Pleasant
Hill
Pleasanton
Richmond
San
Leandro
San
Ramon
Alameda County
Contra
Costa County
This forecast
was prepared by:
Economist
Ryan Ratcliff
UCLA Anderson Forecast
www.uclaforecast.com
East
Bay EDA Contact
Robert Sakai
Technology & Trade Director
(510) 272-3881
robert@eastbayeda.org
East
Bay EDA
1221 Oak St., Ste. 555
Oakland. CA 94612
(510) 272-3885
Serving the East Bay
- the Bright Side of the
San Francisco Bay
For more information on
the East Bay, click on www.eastbayeda.org
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OCTOBER
2007 EDITION
INTRODUCTION
East Bay EDA is
pleased to provide the East Bay Quarterly Forecast, authored by Ryan
Ratcliff, and David Shulman, Economists
with the UCLA Anderson Forecast.
Download PDF (417k)
To view the Bay Area "by the numbers", download the
Quarterly Indicators Sheet for Q3 2007. This one-page summary includes GDP, CPI, employment, housing, construction permit, hotel, airline passenger, and foreign trade data.
The central story of the California economy continues to be real estate drag. As both construction and mortgage related job loss has accelerated during the summer, recent job growth has slowed to a crawl.
The Bay Area has fared a little better, but California’s malaise has finally started to take its toll on the region. The East Bay has been the region’s microcosm of California’s wider problems: the downturn in Construction, the slowing of high-end service jobs, even the dubious distinction of having the Government sector as the biggest source of new jobs in the last five months. The other half of the Bay Area has continued to march to its own beat, fueled by the continuing recovery of high-tech service jobs; however, even the San Jose economy has showed recent signs of slowing.
Outside of residential real estate, commercial real estate has also been an important factor in the region’s recent economic history – in large part because of the glut of office space left behind after the tech boom. In the East Bay, overall office vacancies have remained near tech bust highs, even as the rest of the region recovered. This appears to be a submarket issue. Recent completions are enough to satisfy the moderate increase in demand in recent years, with Contra Costa seeing an increasing share of the activity. However, other parts of the East Bay continue to suffer from an overhang of office space.
Unemployment in California has been rising steadily since the beginning of the year, and non-farm payroll growth has slowed to a crawl in the last five months. While the Bay Area job market has been the silver lining in the cloudy California economy for a year and a half, the luster is starting to fade.
Figure 1: Year-over-Year NF Payroll
Job Growth
Source: CA EDD, UCLA
Anderson
Forecast
Figure 2:
Oakland
MD NF
Payroll Job Growth
Source: CA EDD, UCLA Anderson
Forecast
Every region in the Bay Area is seeing slower
job growth in the middle of 2007. In the East
Bay (Oakland MD), the job market continues to
mirror the larger statewide trends.
Unfortunately, that also means a substantial
slowdown in payroll job growth in recent months.
The sources of this slowdown are the usual
suspects. Seasonally-adjusted job losses in
Construction employment have accelerated, and
now total 7600 since the beginning of the year.
Nearly half of those losses occurred in July and
August.
Continue reading "Bay Area Job Markets"
For California as a whole, most of what we need to know about real estate’s role in economy over the past five years comes from the residential side. However, the severity of the tech bust and the relatively small role that new building has played in the Bay Area together mean that we’re missing a significant portion of the story if we don’t take a look at non-residential construction. Of course, the relative importance of residential construction versus non-residential construction varies across the region. Figures 9 and 10 suggest that we can divide the six Bay Area counties into three groups.
The first group is Alameda and Santa Clara Counties, where commercial construction has been the primary story. Both counties have seen the five-year average value of non-residential building permits falling steadily since the heyday of the late 1990s. At the same time, the residential building boom has been mostly a non-event in this group. The five-year annual average value of residential building permits in Santa Clara County has stayed roughly constant since the late ‘90s average, while Alameda County’s residential construction has shown a small but significant boom. Thus, construction activity of all sorts has been steadily declining in the economies of this group.
Continue reading "Commercial Real Estate"
The East Bay economy has moved in virtual lock-step with the California economy for almost a year. As such, our forecast for California gives a good idea of what to expect for the East Bay in the next two years. Real estate drag will keep the rest of the economy growing at a sluggish pace for at least four more quarters, but no other sectors currently look poised for any independent bouts of job loss. Contra Costa will continue to bear the brunt of the real estate problems, but Alameda County will not emerge unscathed. Of course, a sluggish economy also means sluggish demand for commercial real estate. Office space in the East Bay will see demand slacken, but the minimal pace of construction should keep vacancy rates about where they are. While there is some potential that the continued recovery of high-tech services in the region will offset some of the real estate drag and some of the impact on local office markets, this summer’s evidence to date suggests that this hope is dimming.
The second quarter of 2007 has largely lived
up to our expectations, showing substantial
job loss in real estate-related sectors and
sluggish growth elsewhere. Unemployment and
mortgage defaults continue to rise. While
these fairly dismal results may sound a lot
like the beginning of a recession, overall
job growth remains positive, and personal
income growth remained strong in the first
quarter of 2007. In fact, these are the
beginnings of exactly the economy we have
predicted for some time: sluggish, but no
recession. However, the difference between
the two is getting smaller all the time….
Continue reading "California
Summary"
Despite the stronger than expected 4% growth
in the second quarter, the re-pricing of
hitherto very easy credit will cause the
U.S. economy to have a “near recession
experience.” Specifically, we forecast real
GDP growth to be just above 1% for the
fourth quarter of 2007 and the first quarter
of 2008. Thereafter, we forecast growth to
remain tepid for the balance of 2008 and
return to trend 3% growth in 2009.
Nevertheless, by mid-2008 the unemployment
rate is forecast to reach 5.2%, up from the
current 4.6%. Of course, when the economy
slows to a 1% pace, it runs the risk of
falling into an actual recession, just as
when an airplane’s velocity gets too close
to its “stall speed” and it falls out of the
sky.
Continue reading "The
Nation"
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