Global downturn hits Bay Area businesses
By: John Upton
November 20, 2008
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| Crisis building: More than half of Bay Area construction firms expect to reduce their work force in the next six months due to the slumping economy. (AP file photo) |
SAN FRANCISCO — Businesses in San Francisco have been hit hard by the global economic malaise, with new figures showing Bay Area business optimism has sunk to new lows and more than one-third of companies in The City expect to shed staff before June.
The Bay Area Council, a big-business-funded public policy organization, released quarterly figures this week that suggest a Bay Area-wide slump in business confidence will affect job security most severely in San Francisco and San Mateo County.
Across the Bay Area, 47 percent of companies expect conditions in their industries to worsen during the next six months, according to figures in the 13-page report.
“A lot of people have been hoping that the recession and the downturn would pass by the Bay Area,” council spokesman John Grubb said. “We’re not going to escape that fate.”
Bay Area business confidence in November reached its lowest point since the group began surveying chief executives four times a year in 2001, figures show.
The industries with the bleakest job outlooks include the construction and transportation sector — with 60 percent of Bay Area firms expecting to reduce their work force in the next six months — along with the retail and financial services sectors, according to the report.
U.S. Census data show 10 percent of employees in San Francisco and San Mateo County work in the financial sector, which is experiencing consolidations and layoffs linked to the credit and banking crises. Nationwide, about 7 percent work in the industry.
Tumult in the financial industry is rippling through other sectors of the economy, including the commercial real estate sector in downtown San Francisco, where all the financial giants involved in takeovers or mergers maintain operations, according to tenant broker Frank Fudem.
“It’s a multiplier effect,” Fudem said. “We’re seeing contraction in many other sectors that are not financial in nature.”
More than 700,000 square feet of leased office space had been abandoned by tenants and left vacant in 2008, before the financial markets descended into turmoil, according to Fudem. The impact of the turmoil on commercial occupancy rates is expected to hit in the coming months, he said.
“We are not at the bottom,” Fudem said.
Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, said The City cannot afford to take its long-running status as an economic powerhouse for granted.
“Most people assume we’ll come out of this — and we will — but I think we need to stay focused on the long-term competitiveness of the region,” Metcalf said. “We need to do some pruning on the tangle of regulations that has grown up in the last decade that raise the cost of doing business here.”
Tourism strong despite downturn
The companies with the brightest employment prospects in the Bay Area during the next six months are those in the tourism, leisure and hospitality sectors, according to findings in the Bay Area Council’s quarterly consumer-confidence report.
Only 18 percent of companies in the Bay Area expect to increase staffing levels before June, compared with 56 percent in the tourism and hospitality industries, the report shows.
“We’re still very high on the charts of where people want to come,” said San Francisco Convention and Visitors Bureau President Joe D’Alessandro. “We have not become a passé destination.”
The City’s convention industry has been relatively insulated from some of the blows inflicted recently on other popular convention destinations, such as New York, because groups that visit San Francisco for conventions tend to be in the technology and medical sectors, D’Alessandro said.
Those industries have been less swiftly affected by the economic downturn than the financial sector, which D’Alessandro said often holds conventions in other big cities.
The amount of money spent by visitors to San Francisco in 2008 appears likely to break last year’s $8.2 billion record, but the strengthening U.S. dollar combined with a downturn in visitors traveling from Europe bodes less favorably for next year, according to D’Alessandro. “I’m concerned about 2009,” he said. — John Upton
Economic outlook
The Bay Area Council released a survey of firms and what they are anticipating in regards to the California economy:
| San Mateo | S.F. | Bay Area | |
| Conditions to improve in next six months | 7% | 28% | 21% |
| Conditions to worsen in next six months | 60% | 43% | 47% |
| Work force to grow in next six months | 14% | 18% | 18% |
| Work force to shrink in next six months | 48% | 37% | 31% |
| Will begin recovery in less than one year | 27% | 33% | 31% |
| Will begin recovery in one to two years | 73% | 59% | 64% |
| Will begin recovery in three years or later | 0% | 7% | 4% |
Source: Bay Area Council
