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EXHIBIT 99.1
THE APARTMENT MARKETS
IN ORANGE, SANTA CLARA, ALAMEDA,
SAN FRANCISCO AND SAN MATEO
COUNTIES
June 28, 1996
Prepared for
BAY APARTMENT COMMUNITIES, INC.
by
Rosen Consulting Group
1950 Addison Street, Suite 101
Berkeley, CA 94704
(510) 549-4510
Keneth T. Rosen
Arianna K. Van Meurs
Susan G. Underberg
(C) 1996 Rosen Consulting Group
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RCG
- ---------------------- 1950 ADDISON STREET, SUITE 101
ROSEN CONSULTING GROUP BERKELEY, CALIFORNIA 94704
- ---------------------- 510-549-4510 FAX 510-849-1209
June 28, 1996
O'Melveny & Myers, LLP
275 Battery Street
San Francisco, CA 94111
Attn: Peter T. Healy, Esq.
Gentlemen:
Rosen Consulting Group ("RCG") agrees that each of PaineWebber Incorporated,
Dean Witter Reynolds, Inc., A.G. Edwards & Sons, Inc. and Alex. Brown & Sons
Incorporated (as representatives of several underwriters) may rely upon the
attached report dated as of June 28, 1996 respecting Bay Apartment Communities,
Inc. as if it were prepared for them in the first instance and may quote from
and make reference thereto in publicly-filed documents and other reports. RCG
also consents to being referred to as an expert with respect to matters in its
report in filings with governmental agencies and otherwise.
Very truly yours,
/s/ Kenneth T. Rosen
Kenneth T. Rosen
President
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TABLE OF CONTENTS
EXECUTIVE SUMMARY...........................................................iii
ORANGE COUNTY, CA.............................................................1
Recent Economic Trends...............................................1
Forecasted Employment Trends.........................................6
Demographic Trends...................................................8
Affordability, Tenure Choice, and the Demand for Rental Units.......10
Apartment Market Trends.............................................12
SANTA CLARA COUNTY...........................................................15
Recent Economic Trends..............................................15
The Manufacturing Sector.......................................15
Other Sectors of the Santa Clara Economy.......................19
Forecasted Employment Trends........................................20
Demographic Trends .................................................21
Affordability, Tenure Choice, and the Demand for Rental Units.......23
Apartment Market Trends.............................................25
ALAMEDA COUNTY...............................................................29
Recent Economic Trends..............................................29
Forecasted Employment Trends .......................................34
Demographic Trends..................................................35
Affordability, Tenure Choice, and the Demand for Rental Units.......37
Apartment Market Trends.............................................39
SAN FRANCISCO COUNTY.........................................................42
Recent Economic Trends..............................................42
Forecasted Employment Trends .......................................45
Demographic Trends..................................................47
4
Affordability, Tenure Choice, and the Demand for Rental Units.......49
Apartment Market Trends.............................................51
SAN MATEO COUNTY.............................................................54
Recent Economic Trends..............................................54
Forecasted Employment Trends........................................56
Demographic Trends..................................................57
Affordability, Tenure Choice, and the Demand for Rental Units.......59
Apartment Market Trends.............................................61
ATTACHMENT-ROSEN CONSULTING GROUP'S SERVICES.................................64
STAFF BIOGRAPHIES............................................................67
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EXECUTIVE SUMMARY
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ORANGE COUNTY
- Orange County's economy has recovered from the recession of the early
1990s and is growing at a healthy pace, in spite of the County's 1994
bankruptcy filing which had cast doubt on its future growth potential.
Although current economic growth in the County is healthy and is
expected to accelerate through the rest of the 1990s, it will be lower
than the economic growth experienced in the previous two decades.
Employment diversification away from defense and toward communications
and other high tech industries will help the economy maintain more
stable growth over the long run.
- Steadily increasing employment will cause in-migration to Orange County
to accelerate. As the population base grows, the rate of household
formation will accelerate. Already, a high proportion of the households
in Orange County choose to rent, because of the lack of affordability
of single family homes, as well as for lifestyle reasons. As a result,
we believe that demand for apartments in Orange County will be strong
through the second half of the 1990s.
- The high level of recent construction activity caused the apartment
vacancy rate in Orange County to rise to 5% in early 1996, even though
demand for apartments is strong. This increase in vacancy has
alleviated unnaturally tight market conditions. The large pipeline of
multifamily projects in Orange County which are either under
construction or proposed causes us to believe that new supply will
temporarily exceed demand and that the apartment vacancy rate will rise
beyond 5% by the end of 1997, before falling between 1998 and 2000 to
approximately 3.9%. By 2000, apartment rent growth will accelerate to
more than 4% per year, as demand, reflected in net absorption
statistics, accelerates more quickly than construction activity.
SANTA CLARA COUNTY
- Economic activity in Santa Clara County was very strong during 1995 and
is expected to be even stronger during 1996. Much of the recent growth
can be attributed to the semiconductor and the related semiconductor
equipment industry. However, the book-to-bill ratio, a leading
indicator for demand in the semiconductor industry, has dropped below
1.0 during 1996 from a peak of 1.2 in May of 1995, which indicates a
slowing in the semiconductor industry. This slowdown is expected to be
temporary since overall demand for semiconductors has risen
dramatically during the past several years because of the recovery in
consumer spending and the increased use of semiconductor chips in
autos, homes and consumer electronic devices. World chip revenues
increased 41.7% in 1995, following growth of 31.8% in 1994 and 29.1% in
1993, according to the Semiconductor Industry Association. Sectors such
as business services are also growing at a moderately strong pace
because of the increase in employment at software and temporary help
agencies. However, we do not believe that the economy will maintain its
recent rate of growth of 5.0% between April of 1995 and 1996. As a
result, we believe that employment growth will average 2.5% per year
between 1996 and 2000.
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- The employment trends discussed above bode well for household growth in
Santa Clara County. Healthy levels of employment growth and net
migration will lead to the formation of approximately 33,000 new
households between 1995 and 2000. Because fewer than half of the
households can afford to own a single family home, a large number of
new rental households will be created between 1995 and 2000. Given the
age structure of the population and the historical propensity to rent
versus own (also called tenure choice) by age group in Santa Clara
County, we anticipate demand for approximately 9,500 rental units
between 1995 and 2000, around 30% of which will live in projects of
greater than 100 units.
- The apartment inventory in Santa Clara County grew minimally during the
1992 to 1994 time period because of the economic slowdown and the lack
of credit available for apartment construction. By year-end 1995, the
economic recovery had pushed the apartment vacancy rate for projects
with over 100 units down to 2.2%. Spurred by low apartment vacancy
rates and accelerating rent growth, apartment construction has
increased during 1995 and 1996, although 1997 and 1998 should be much
stronger years for new construction, with almost 4,400 units in the
pipeline. We believe that apartment market conditions will tighten
further during 1996, but in 1997 and 1998, the high level of new
construction will exceed demand and cause the apartment vacancy rate to
rise to 4.1%. We also believe that, despite a lower level of demand
resulting from slower economic and demographic growth late in the
decade, construction activity will slow sufficiently in 1999 and 2000
to cause the apartment vacancy rate to fall to approximately 3.1% in
2000. As a result of the tight apartment market conditions, rent growth
will average 5.4% per year between 1995 and 2000.
ALAMEDA COUNTY
- The Oakland metropolitan economy is slowly recovering, to a large
extent fueled by growth from high technology companies, which are
finding southern Alameda County an attractive alternative to Santa
Clara County, especially for large distribution facilities. In
addition, areas in northern Alameda County which are near the
University of California at Berkeley, such as Emeryville, have
attracted a concentration of biotechnology companies which use the
resources of the university. Other sectors of the Alameda County
economy are also growing, such as software developers and port-related
activity. As a result, we expect employment growth for the metropolitan
area to average 2.7% between 1995 and 2000. Most of the growth will
occur in the manufacturing sector, as well as services and trade,
especially where related to the Port of Oakland. However, government
employment growth will weaken as employment decreases at several
military bases which have been slated for closure by the Base
Realignment and Closure Commission.
- As economic growth strengthens, households will move into Alameda
County to take advantage of employment opportunities, and people who
had lived together out of financial necessity will be able to form new
households. We estimate that more than 26,000 net new households will
be created in Alameda County between 1995 and 2000. Of the new
households, approximately 7,800 households that will choose to rent
versus own will be created in Alameda County. Between 20% and 25% of
the total new renter households will rent in apartment complexes of
greater than 100 units.
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- Strong absorption caused the Alameda County apartment vacancy rate to
fall to 3.4% during 1995, and we believe that the apartment market will
remain balanced between 1995 and 2000. An increase in apartment
construction will cause the apartment vacancy rate to rise modestly in
1997 and 1998, but it will remain relatively low, at just over 4%.
Healthy apartment market conditions between 1995 and 2000 will cause
apartment rent growth to accelerate from 2.1% in 1995 to an average of
4.9% per year between 1995 and 2000.
SAN FRANCISCO COUNTY
- Employment in San Francisco County is expected to grow about 1% per
year between 1995 and 2000. The recent employment growth has been
largely fueled by the county's large services sector. The services
sector is large because the city is a legal and accounting center, as
well as a regional medical center. The area also has a large tourism
and convention industry. These visitors make purchases, thereby
contributing to the retail trade sector. Among the weakest links in the
economy is government, where growth has been constrained by the closure
of military bases, the opening of the new federal office complex in
downtown Oakland, and pressure at the state and county level to cut
employment. Since San Francisco County is largely built-out, with
little vacant land available for commercial or residential development,
and an expensive place to locate a business, we expect much of the
growth over the next ten years to come from expansion of existing
businesses.
- Population growth in San Francisco County has averaged 0.7% per year
during the last five years, a rate which we expect will continue
between 1995 and 2000. Since the county is small and relatively
built-out, sites for new residential construction are limited, leaving
little room for population to grow. In addition, the population in the
area is highly influenced by international in-migration, which is not
sensitive to domestic economic cycles. These factors help explain the
steady population and household increase during the recession of the
early 1990s and the slower growth during the more recent period of
economic expansion.
- Household growth will accelerate slightly, as a result of the age
distribution of the projected population growth. Because of San
Francisco's high proportion of renters (65.5% in 1990) compared to the
national average (35.8% in 1990), a large number of the new households
created through 2000 will become renters. We expect household growth
will generate demand growth for between 500 and 600 units per year
between 1995 and 2000. Through the end of the decade, we expect demand
growth to outpace new construction. The apartment vacancy rate is
expected to be in the 3% range during much of that time, although it is
likely to rise to 4.7% by 2000 as construction activity increases,
particularly in the Mission Bay area. The low apartment vacancy rate
will keep rent growth strong, ranging from 6% per year in the next few
years down to 4% per year after 1998, when supply additions catch up
with demand growth.
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SAN MATEO COUNTY
- Employment growth in the San Francisco metropolitan area, which
includes San Mateo County, accelerated to 1.2% in 1995, fueled in part
by the expanding high technology and biotechnology industries, as well
as airport-related activity occurring in San Mateo County. Reflecting
the strong role which San Mateo County plays in the growth of the San
Francisco economy, San Mateo's employment growth during 1995 was 1.5%.
We anticipate that employment growth in San Mateo County will continue
to be a major driver of metropolitan economic growth, averaging in the
2.4% to 2.5% per year range over the next four years.
- Demographic trends will mirror these employment growth projections,
with household growth accelerating to 0.9% per year during the 1995 to
2000 period, from 0.6% per year during the first half of the 1990s. We
expect that this growth will lead to the creation of over 11,000 new
households over the second half of the decade, which, given
affordability and other factors such as the propensity of different age
groups to rent, should result in total demand for rental housing of
over 2,000 new units, or 400 units per year.
- The San Mateo County apartment market is currently extremely tight,
with a low vacancy rate among projects of more than 100 units of 2.8%
as of year-end 1995. The demand and supply outlook for the San Mateo
County apartment market suggest that apartment market conditions will
tighten further during the next two years, before receiving relief in
the form of several new apartment project completions in 1998. As a
result, apartment rent growth will be strong, in the 6% to 7% range
during each of the next two years, decelerating slowly thereafter as
the apartment vacancy rate eases somewhat.
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ORANGE COUNTY, CA
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RECENT ECONOMIC TRENDS
Orange County has a healthy and expanding economy, even though some people
predicted that the county's declaration of bankruptcy in late 1994 would
devastate the local economy. Between April of 1995 and 1996, nonagricultural
payroll employment in Orange County increased at a healthy rate of 2.1%,
representing the addition of 23,700 jobs. This rate of growth is stronger than
the national average of 1.5% during the same time period and leads us to believe
that, following several years of weak employment growth in the early 1990s,
employment growth in Orange County will surpass the national average in 1996 and
through 2000 (see Figure 1.1).
The services sector is the largest and most rapidly growing part of the economy,
with an employment increase of 4.3% between April of 1995 and 1996. Within the
services sector, business services employment increased 10.5% in 1995 and growth
through April indicates that the business services subsector will experience a
7.4% increase in employment during 1996 (see Table 1.1). Growth in business
services is driven by industries ranging from temporary agencies to software
development. As the home of Disneyland, Orange County's second largest employer,
and other resorts, Orange County is a major tourist destination (see Table 1.2).
As a result, the hotel employment sector is more highly concentrated in Orange
County than in the nation as a whole (see Table 1.3). Disney has planned a major
expansion in Orange County, although a date for construction has not been set.
The expansion, similar to Epcot Center in Florida, will be called Wescot and
will be located on the current parking lot and adjacent properties of
Disneyland. The project potentially could include thousands of new hotel rooms.
It is
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FIGURE 1.1
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Total Non-Ag Employment Growth
Orange County, CA MSA
---------------------
[GRAPHIC OMITTED]
Sources: Historical data-Bureau of Labor Statistics,
Calculations and Forcasts-RCG
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TABLE 1.1
ORANGE COUNTY DETAILED EMPLOYMENT (000)
1989 1990 1991 1992 1993 1994 1995 1996e
------ ------ ------ ------ ------ ------ ------ ------
Total Nonagricultural 1156.7 1172.4 1143.7 1126.0 1115.4 1126.8 1148.7 1172.9
% Change 2.4% 1.4% -2.4% -1.5% -0.9% 1.0% 1.9% 2.1%
Construction 62.7 57.2 51.1 47.7 44.5 47.3 49.5 51.4
% Change 5.7% -8.8% -10.7% -6.7% -6.7% 6.3% 4.7% 3.8%
Manufacturing 251.0 244.0 229.6 218.8 207.2 205.0 204.4 204.1
% Change -1.3% -2.8% -5.9% -4.7% -5.3% -1.1% -0.3% -0.1%
Industrial M/C & Equip 31.9 31.0 29.6 30.6 28.8 25.6 23.9 25.0
% Change -2.8% -4.5% 3.4% -5.9% -11.1% -6.6% 4.6%
Computer & Off Equip 13.3 12.9 12.1 13.7 12.9 10.3 8.5 8.9
% Change -7.0% -3.0% -6.2% 13.2% -5.8% -20.2% -17.5% 4.7%
Electronic Equip 37.1 35.7 33.1 28.1 24.5 25.1 26.7 27.0
% Change -3.8% -7.3% -15.1% -12.8% 2.4% 6.4% 1.1%
Guided Missiles 14.7 15.0 13.7 11.9 9.9 8.7 7.6 7.3
% Change -0.7% 2.0% -8.7% -13.1% -16.8% -12.1% -12.6% -3.9%
Instruments & Rel Prod 40.2 36.3 34.9 34.1 31.2 30.2 28.0 26.3
% Change -9.7% -3.9% -2.3% -8.5% -3.2% -7.3% -6.1%
Search & Navigation Equip 16.9 15.6 14.9 12.0 11.6 9.1 7.8
% Change -7.7% -4.5% -19.5% -3.3% -21.6% -14.3%
Measuring Devices 8.6 8.3 8.0 8.1 8.3 7.8 8.5 8.3
% Change -3.5% -3.6% 1.2% 2.5% -6.0% 9.0% -2.4%
Aircraft & Parts 6.8 8.3 8.6 6.8 5.8 5.6 6.0 6.3
% Change 22.1% 3.6% -20.9% -14.7% -3.4% 7.1% 5.0%
T.C.P.U. 34.3 36.4 36.5 35.4 36.7 39.4 42.5 43.9
% Change 0.3% 6.1% 0.3% -3.0% 3.7% 7.4% 7.9% 3.3%
Trade 295.8 299.0 283.2 280.7 277.7 282.7 290.9 297.0
% Change 2.7% 1.1% -5.3% -0.9% -1.1% 1.8% 2.9% 2.1%
Wholesale Trade 76.8 81.4 79.3 79.2 76.7 79.3 84.7 88.7
% Change 6.8% 6.0% -2.6% -0.1% -3.2% 3.4% 6.8% 4.7%
Retail Trade 218.9 217.6 203.9 201.5 201.0 203.4 206.2 208.3
% Change 1.2% -0.6% -6.3% -1.2% -0.2% 1.2% 1.4% 1.0%
F.I.R.E. 91.8 96.0 94.2 94.2 93.8 91.8 85.5 83.9
% Change 2.3% 4.6% -1.9% 0.0% -0.4% -2.1% -6.9% -1.9%
Insurance 28.1 29.1 29.4 29.6 29.0 29.2 28.0 27.5
% Change -1.1% 3.6% 1.0% 0.7% -2.0% 0.7% -4.1% -1.8%
Real Estate 27.6 29.3 28.0 26.8 25.0 25.1 24.5 24.3
% Change 5.7% 6.2% -4.4% -4.3% -6.7% 0.4% -2.4% -0.8%
Services 299.5 312.6 319.1 320.7 326.9 330.6 346.9 362.8
% Change 5.0% 4.4% 2.1% 0.5% 1.9% 1.1% 4.9% 4.6%
Hotels & Oth Lodging 20.1 20.1 19.5 17.3 17.2 17.0 17.5 18.3
% Change 1.0% 0.0% -3.0% -11.3% -0.6% -1.2% 2.9% 4.6%
Business Services 75.3 77.3 76.1 80.9 83.8 85.6 94.6 101.6
% Change 7.4% 2.7% -1.6% 6.3% 3.6% 2.1% 10.5% 7.4%
Health Services 64.0 68.9 74.5 74.7 75.8 76.3 76.5 77.8
% Change 3.9% 7.7% 8.1% 0.3% 1.5% 0.7% 0.3% 1.7%
Engineering & Mgm't Svcs 37.4 40.0 40.0 38.6 38.4 38.0 39.4 39.7
% Change 9.7% 7.0% 0.0% -3.5% -0.5% -1.0% 3.7% 0.8%
Total Government 120.5 126.1 128.7 127.5 127.8 129.2 128.1 129.3
% Change 2.3% 4.6% 2.1% -0.9% 0.2% 1.1% -0.9% 0.9%
Sources: Historical data-Bureau of Labor Statistics; Calculations and
Forecasts-RCG.
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TABLE 1.2
ORANGE COUNTY'S LARGEST EMPLOYERS
Company Employees
------- ---------
Family Restaurants 14,000
Disneyland 9,000
University of California, Irvine 8,370
Rockwell Corporation 6,900
Hughes Aircraft Company 6,800
McDonnell Douglas Aerospace 6,664
Freedom Communications 6,000
Bank of America 5,800
FHP International 5,500
Fluor Daniel 5,000
Pacific Bell 4,860
Food 4 Less 4,800
Pacificare Health Systems 4,600
Knott's Berry Farm 4,000
Taco Bell Corp. 4,000
Source: Orange County Business Council, Jan 31, 1996
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expected to create thousands of construction jobs and permanent positions.
In other recreation related projects, the city of Anaheim and Disney have
reached an agreement for a $100 million renovation of Anaheim Stadium which will
convert the stadium to a 45,000 to 47,000-seat purely baseball facility. Disney,
which owns 25% of the California Angels baseball team and manages the team, will
manage construction on the stadium project over the next two to three years. In
addition, Anaheim's planning department has approved Sportstown Anaheim, a
mixed-use entertainment project on the same site, which will include a
70,500-seat football stadium, as well as retail, restaurant, hotel, and
exhibition uses. The city hopes to attract a National Football League franchise
with the new football stadium.
Following the services sector, the trade sector added the largest number of new
jobs during the past year. The wholesale trade subsector, which comprises
approximately 30% of trade sector employment, has grown at a rapid pace for more
than two years, reflecting strong demand for warehouse space in the Orange
County market. In one of the most recent large transactions, in the first
quarter of 1996, Cerritos EPT Warehouse relocated from Amarillo, Texas, into
200,000 square feet in Anaheim.
Approximately 70% of trade sector employment is in retail trade. Like many parts
of the country, Orange County has experienced a surge in retail construction
during the past several years. One reason that Orange County is attractive to
retailers is the high level of disposable income of its residents. Of the top
317 metropolitan areas in the country, Orange County ranks 12th in total
disposable income and 13th in total retail sales. Half of all households have
incomes greater than $50,000, making Orange County one of the wealthiest
metropolitan areas in the country. National chains, existing and new
restaurants, home improvement stores and office supply stores are all expanding
in the market. During 1995, the new 250,000 square-foot Entertainment Center in
Irvine Spectrum opened. A number of other shopping centers are under
construction or recently completed. These new shopping centers will lead to an
increase in retail trade employment when their tenants hire employees to staff
their stores.
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TABLE 1.3
ORANGE COUNTY LOCATION QUOTIENTS
Sector Location Quotient*
- ------ ------------------
Guided Missiles, Space Vehicles, Parts 7.23
Search and Navigation Equipment 5.37
Instruments and Related Products 3.27
Measuring and Controlling Devices 2.92
Computer and Office Equipment 2.49
Real Estate 1.82
Electronic & Other Electric Equipment 1.65
Engineering & Management Services 1.50
Business Services 1.48
Wholesale Trade 1.36
Aircraft and Parts 1.30
Durable Goods 1.26
Insurance 1.25
Miscellaneous Manufacturing Industries 1.24
Industrial Machinery and Equipment 1.18
Hotels and Other Lodging Places 1.14
Eating and Drinking Places 1.14
Apparel and Accessory Stores 1.13
* A location quotient measures the regional concentration of employment in a
particular industry. If employment in an industry were evenly distributed
throughout the U.S., a region's location quotient would be 1.0. Mathematically,
it is defined as the ratio of the percentage of total employment in industry x
in a given region divided by the percentage of total employment in industry x
nationally.
Sources: U.S. Bureau of Labor Statistics- 1995 data; Calculations-RCG
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The retail trade sector has experienced only modest
growth during the past several years, in spite of the market's robust retail
expansion, because the sector has been negatively affected by downsizing among
retailers. For example, several Alpha Beta stores were closed in 1995 when Alpha
Beta merged with Ralphs grocery stores. In addition, as a result of the purchase
of Broadway Stores by Federated, the fate of two of the six Broadway stores
which anchor Orange County malls is unknown. Finally, Irvine-based Family
Restaurants announced in April of 1996 that it is closing its remaining 21
Charley Brown's and Reuben's dinner houses and eliminating 1,350 employees
statewide.
The Orange County bankruptcy filing has not had the negative impact anticipated
by some followers of the market. Some construction projects have been delayed or
canceled, but businesses are expanding and relocating to Orange County,
indicating that they have not lost confidence in the area. Orange County emerged
from bankruptcy in June of 1996. In response to the bankruptcy, by year-end
1995, the county had eliminated 3,000 government sector jobs and cut various
government services. The job loss is reflected in government sector employment,
which declined 0.9% in 1995, but grew at a modest rate of 1.0% between April of
1995 and 1996. The incorporated cities, school districts, and special districts
which had invested in the fund recovered 75% of their invested funds. In October
of 1995, Governor
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Wilson signed three bills to allow county officials to pay off
more than $700 million in bond debt over the next twenty years, primarily by
diverting over $800 million in transportation revenue and other funds. The
county is also seeking damages from Wall Street brokers, law firms and auditors
to help repay its debt, although these attempts may be curtailed by a report
which places most of the blame for the bankruptcy on the county's officials and
residents.
Government sector employment has also been affected by the closure of two Marine
air bases, El Toro and Tustin. Both were slated for closure by the 1993 Base
Realignment and Closure Commission meetings. They are beginning to wind down
operations and will be fully closed by July of 1999. At fiscal year-end 1995, El
Toro had 4,400 military and 1,000 civilian employees, while Tustin had 4,000
military and just 100 civilian employees. The two bases also had about 1,200
employees categorized as "other." Voters approved a plan to turn the 4,738-acre
El Toro base into a commercial airport, but no progress on development has been
made because nearby residents oppose the plan. Three mixed-use alternatives are
being considered for the 1,558-acre Tustin site.
Growth in the transportation, communications, and public utilities (TCPU) sector
has slowed during 1996, although it has remained healthy. TCPU sector employment
gained 7.9% during 1995, but between April of 1995 and 1996, employment in the
TCPU sector increased 3.4%. A number of communications companies have
established significant operations in Orange County. Companies moving into the
area include Cox Communications, which leased more than 100,000 square feet in
Irvine for its Wireless Communications division. L.A. Cellular expanded from Los
Angeles County into a data center in Canyon Corporate Center in Anaheim. Air
Touch expanded its existing 200,000 square-foot lease by another 189,000 square
feet.
Growth in the construction sector has also slowed during 1996. Construction
sector employment gained 1.8% between April of 1995 and 1996, versus gains of
6.3% in 1994 and 4.7% in 1995. The investment pool losses are dampening
construction sector growth because several construction projects have been
postponed or delayed. The Orange County Transportation Authority was the largest
single fund participant. As a result of its losses and its outlook for less
funds in the future, Orange County is developing the first tollways in the state
of California. By 1995, 7.5 miles of the Foothill Tollway had opened. When
completed around 2010, the 30-mile tollway will extend from the Eastern Tollway
in Tustin to the San Diego Freeway in San Clemente in extreme southern Orange
County and will provide improved access for the foothill communities of Foothill
Ranch, Rancho Santa Margarita, Dove Canyon, Coto de Caza, and northern Mission
Viejo. Construction is also underway on the 15-mile San Joaquin Hills Tollway
which stretches from MacArthur Boulevard and the Corona del Mar Freeway to the
San Diego Freeway south of Crown Valley Parkway. When completed in 1997, it will
provide an alternative to the congested San Diego Freeway. The 23-mile Eastern
Tollway will begin construction in 1996 and will stretch from the Riverside
Freeway south to the Santa Ana Freeway.
The manufacturing sector, which includes both defense and non-defense high tech
activity, has experienced the greatest job loss during the 1990s. Between April
of 1995 and 1996, manufacturing sector employment decreased 0.5%, reflecting
continued weakness in the defense industry. Even after defense sector cutbacks
during the past several years, the four most highly concentrated employment
sectors are all related to defense manufacturing. These include guided missiles,
search and navigation equipment, instruments, and measuring devices. In
addition, three of Orange County's six largest private
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sector employers, Rockwell International, Hughes Aircraft, and McDonnell Douglas
Aerospace, are heavily involved in the defense industry. In positive news for
the manufacturing sector, the aerospace industry is close to stabilizing.
Rockwell International has expanded into 100,000 square feet of leased space,
and the company acquired two office buildings totaling 67,000 square feet near
its Newport Beach manufacturing plant at the end of 1995.
Parts of the non-defense high technology industry have been growing for several
years. For example, employment in the electronic and communications equipment
sectors has increased at a healthy pace for more than two years. Motorola is
increasing employment at its MOS 10 integrated circuit semiconductor facility in
Irvine. BEI Sensors and Motion Systems is consolidating its San Marcos and Costa
Mesa operations to the Irvine Business Complex. The new location will initially
employ 250 workers, and the company expects to add another 200 employees during
the next several years. In addition, the presence of the University of
California at Irvine has made Orange County a more significant player in the
biotech industry.
In more traditional manufacturing employment sectors, RSI Home Products will
occupy two distribution centers, totaling nearly 1.2 million square feet, which
are currently under construction in Orange County. Universal Alloy Corporation
plans to expand its aluminum extrusion mill in Anaheim, boosting the complex's
size from 170,000 square feet to more than 235,000 square feet. The project will
be completed in early 1997. Purged Sled Company plans to move its snowboard
manufacturing operations to a 35,000 square-foot location in Irvine.
FORECASTED EMPLOYMENT TRENDS
Orange County's location in the lucrative Southern California market, the
proximity to a large and highly talented labor force, the presence of a major
research university, and the availability of transportation, all suggest that
this market will grow well into the next century. However, Orange County's
growth rates will be lower than in previous decades. Between 1995 and 2000, we
anticipate employment growth to occur at a 2.5% compound annual growth rate,
compared with growth of 1.0% between 1990 and 1995 (see Table 1.4).
The bulk of the new jobs added will be in the services and trade sectors. The
TCPU sector will also show healthy growth as Orange County continues to attract
communications companies. Increased construction activity in both the commercial
and residential markets, as well as major infrastructure projects, will keep
growth in the construction sector healthy. As the aerospace industry stabilizes,
we anticipate slow growth in the manufacturing sector beginning in 1997.
Finally, growth in the government sector will be modest as the impact of the
1994 bankruptcy is felt in future fiscal years.
Rosen Consulting Group 6
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TABLE 1.4
ORANGE COUNTY EMPLOYMENT FORECAST
1993 1994 1995 4/96 1996f 1997f 1998f 1999f 2000f
------ ------ ------- ------ ------ ------ ------ ------ ------
Total Nonagricultural 1115.4 1126.8 1148.7 1170.3 1172.9 1200.0 1229.5 1262.6 1300.8
% Change -0.9% 1.0% 1.9% 2.1% 2.1% 2.3% 2.5% 2.7% 3.0%
Construction 44.5 47.3 49.5 50.3 51.4 52.1 53.3 54.9 56.8
% Change -6.7% 6.3% 4.7% 1.8% 3.8% 1.3% 2.3% 3.0% 3.5%
Manufacturing 207.2 205.0 204.4 204.1 204.1 204.9 206.8 208.8 211.3
% Change -5.3% -1.1% -0.3% -0.5% -0.1% 0.4% 0.9% 1.0% 1.2%
T.C.P.U. 36.7 39.4 42.5 43.6 43.9 45.0 46.3 47.8 49.5
% Change 3.7% 7.4% 7.9% 3.4% 3.3% 2.5% 2.9% 3.3% 3.6%
Trade 277.7 282.7 290.9 296.8 297.0 303.5 311.1 319.2 326.1
% Change -1.1% 1.8% 2.9% 2.4% 2.1% 2.2% 2.5% 2.6% 2.8%
F.I.R.E 93.8 91.8 85.5 84.7 83.9 85.3 87.2 89.3 91.7
% Change -0.4% -2.1% -6.9% -1.0% -1.9% 1.7% 2.2% 2.4% 2.7%
Services 326.9 330.6 346.9 360.3 362.8 378.8 395.4 413.2 432.6
% Change 1.9% 1.1% 4.9% 4.3% 4.6% 4.4% 4.4% 4.5% 4.7%
Total Government 127.8 129.2 128.1 129.5 129.3 129.4 128.4 128.4 129.7
% Change 0.2% 1.1% -0.9% 1.0% 0.9% 0.1% -0.8% 0.0% 1.0%
Sources: Historical data-Bureau of Labor Statistics, Calculations and
forecasts-RCG.
Rosen Consulting Group 7
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DEMOGRAPHIC TRENDS
As Orange County's economy has strengthened, population growth is accelerating.
Between 1990 and 1995, population growth averaged 1.3% per year for Orange
County. This low level of growth reflects weak economic conditions and people
leaving the metropolitan area in search of job opportunities. Some people
predicted continued weakness in population growth following the bankruptcy
filing, which brought the prospect of higher taxes and fewer services. However,
people have not been deterred by the bankruptcy, and population growth is
expected to accelerate to an average rate of 1.5% per year between 1995 and 2000
(see Table 1.5). Although this rate is significantly lower than that experienced
during the 1980s, when Orange County's population increased an average of 2.2%
per year, it is significantly higher than the national average of 1.0% per year.
A 1.5% compound annual growth rate will lead to the addition of almost 200,000
people to the county's population base between 1995 and 2000.
TABLE 1.5
ORANGE COUNTY POPULATION BY AGE
COMPOUND ANNUAL GROWTH RATE
AGE GROUP 1980 1990 1995 2000 1980-1990 1990-1995 1995-2000
- --------- ---- ---- ---- ---- --------- --------- ---------
Under 19 602,572 663,212 669,871 679,979 1.0% 0.2% 0.3%
20-24 201,086 219,145 226,923 237,320 0.9% 0.7% 0.9%
25-34 346,183 489,232 516,738 543,097 3.5% 1.1% 1.0%
35-44 250,743 378,712 443,310 521,446 4.2% 3.2% 3.3%
45-54 206,545 259,699 281,150 311,937 2.3% 1.6% 2.1%
55-64 164,667 181,565 188,009 198,580 1.0% 0.7% 1.1%
65+ 160,913 218,991 241,784 273,556 3.1% 2.0% 2.5%
Total 1,932,709 2,410,556 2,567,786 2,765,916 2.2% 1.3% 1.5%
Sources: Historical data - U.S. Census Bureau; Calculations and forecasts - RCG.
Most of the population gain during recent years in Orange County is attributable
to natural increase (births less deaths), as opposed to in-migration. Natural
increase has been fueled by a high level of births. Because homes in Orange
County are more affordable than in other parts of southern California, it is a
popular location for young households which are buying first homes and starting
families.
Net migration also plays an important role in population growth. Negative net
migration through most of the first half of the decade caused population growth
to slow. The response of migration can be seen using change of address data from
the Department of Motor Vehicles. Data for Orange County shows that, when
employment growth resumed in 1994, out-migration slowed significantly (see Table
1.6). For the fiscal year which will end June 30, 1996, we anticipate that the
net flow of drivers to Orange County will have turned positive, representing
positive in-migration to Orange County for the first time since 1992.
Rosen Consulting Group 8
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TABLE 1.6
ORANGE COUNTY DRIVERS LICENSE MIGRATION DATA
Estimated Net
Net Drivers Population
Fiscal Year Drivers to: Drivers from: In (Out) In (Out)
- ----------- ----------- ------------- ----------- -------------
89-90 122,749 130,449 (7,700) (11,550)
90-91 120,950 127,839 (6,889) (10,334)
91-92 116,088 122,602 (6,514) (9,771)
92-93 98,848 112,772 (13,924) (20,886)
93-94 113,745 124,174 (10,429) (15,644)
94-95 109,857 111,774 (1,917) (2,876)
Sources: Historical Data-California Department of Motor Vehicles Driver License
Address Change Report-August 1990-1995; Calculations-RCG.
Like population growth, household formation was weak during the first half of
the 1990s. Between 1990 and 1995, approximately 46,000 new households were
created in Orange County. As population growth accelerates in the second half of
the decade, we anticipate that household formation will strengthen to 1.4% per
year, representing the total addition during that period of about 63,000
households (see Table 1.7). The largest number of new households will be added
in the 35 to 44 year old age group, followed by the over 65 age group.
TABLE 1.7
ORANGE COUNTY HOUSEHOLDS BY AGE
Compound Annual Growth Rate
----------------------------------------
Age Groups 1980 1990 1995 2000 1980-1990 1990-1995 1995-2000
- ---------- ------- ------- ------- ------- --------- --------- ---------
15-24 60,181 41,640 41,640 42,058 -3.6% 0.0% 0.2%
25-34 173,048 201,770 205,838 212,087 1.5% 0.4% 0.6%
35-44 141,125 197,632 223,602 254,222 3.4% 2.5% 2.6%
45-54 119,091 147,546 153,543 163,786 2.2% 0.8% 1.3%
55-64 97,696 107,136 108,212 111,497 0.9% 0.2% 0.6%
65+ 95,918 133,125 142,006 154,494 3.3% 1.3% 1.7%
Total 687,059 828,849 874,841 938,145 1.9% 1.1% 1.4%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
Rosen Consulting Group 9
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AFFORDABILITY, TENURE CHOICE, AND THE DEMAND FOR RENTAL UNITS
Between 1990 and 1993, affordability of single family homes in Orange County
increased significantly, because of the combination of falling interest rates
and declining house prices. By 1993, 42.7% of the county's households could
afford the median-priced home of $217,200, versus 22.5% in 1990 when the median
price of an existing single family home was $242,358 (see Table 1.8). Although
affordability dropped slightly in 1994 as interest rates rose, falling interest
rates in 1995 caused affordability to increase to its highest level in recent
history. Even though affordability is currently high for Orange County, fewer
households in the county than in the nation as a whole can afford the
median-priced home, because home prices in Orange County are well above the
national average. Because of the relatively low proportion of households which
can afford to own, almost 40% of Orange County's households rented in 1990,
compared to a lower 35.8% for the nation in 1990.
TABLE 1.8
AFFORDABILITY DATA
ORANGE COUNTY AND THE UNITED STATES
1990 1991 1992 1993 1994 1995 1996e
---- ---- ---- ---- ----
Median Existing
Home Price
Orange County $242,358 $239,680 $230,860 $217,200 $211,000 $208,800 $212,350
% Change 0.3% -1.1% -3.7% -5.9% -2.9% -1.0% 1.7%
United States $95,500 $100,300 $103,700 $106,800 $109,800 $112,900 $117,500
% Change 2.6% 5.0% 3.4% 3.0% 2.8% 2.8% 4.1%
Household Income
Orange County $70,789 $71,190 $73,208 $73,712 $76,919 $79,096 $81,859
% Change 6.0% 0.6% 2.8% 0.7% 4.4% 2.8% 3.5%
United States $37,403 $37,922 $39,020 $41,428 $43,845 $45,999
% Change 2.4% 1.4% 2.9% 6.2% 5.8% 4.9%
Mortgage Int.
Rate 10.1% 9.2% 8.4% 7.3% 8.4% 8.0% 7.5%
Households Able
to Afford Median-
Priced Home
Orange County 22.5% 27.1% 33.8% 42.7% 41.7% 45.9% 51.3%
United States 50.0% 51.0% 55.0% 58.0% 57.0% 54.8%
Sources: Historical data-National Association of Realtors, Federal Reserve Board
of Governors, U.S. Bureau of the Census; Calculations and 1996 estimate-RCG.
A number of factors other than affordability also affect tenure choice, which is
a household's decision of whether to rent or own its residence. For example,
some households make a lifestyle decision to rent. Households which face
economic uncertainty may elect not to commit themselves to a mortgage. In
addition, some householders want the amenities offered in many of the recently
constructed upscale apartment projects. These amenities often include swimming
pools, workout facilities, concierge services and even attached garages.
Rosen Consulting Group 10
19
While the proportion of households choosing to rent either apartments or other
residences was steady between 1980s and 1990, we believe the proportion of
households choosing to rent fell during the first half of the 1990s because of
the increased affordability of housing and the aging of the Orange County
population. Older households, all else equal, have a higher rate of
home-ownership than do younger households. Thus, we have lowered the proportion
of households that we expect will rent.
This renter proportion is applied to the new households forecasted to be created
between 1995 and 2000 in order to determine the new rental households formed
during the second half of the decade. The calculation shows that about 22,400
new renter households will be created during the second half of the 1990s in
Orange County (see Table 1.9). The marginal renter proportion of 35.4% is lower
than the average renter proportion of 39.9% because of slow growth in the
younger age groups which have the highest propensity to rent.
TABLE 1.9
PROJECTION OF APARTMENT DEMAND BY AGE
ORANGE COUNTY
Change in
1990 1995 2000 Households Renter New
Age Groups Households Households Households 1995-2000 Proportion Rental Units
- ---------- ---------- ---------- ---------- ----------- ---------- ------------
15-24 41,640 41,640 42,058 418 90.0% 376
25-34 201,770 205,838 212,087 6,250 63.0% 3,934
35-44 197,632 223,602 254,222 30,620 39.2% 11,994
45-54 147,546 153,543 163,786 10,243 26.6% 2,720
55-64 107,136 108,212 111,497 3,286 20.1% 659
65+ 133,125 142,006 154,494 12,488 21.9% 2,733
Total 828,849 874,841 938,145 63,304 35.4% 22,417
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
Rosen Consulting Group 11
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Apartment Market Trends
Renewed economic and demographic growth during the past several years is
creating the stimulus for apartment demand in Orange County. On the strength of
this demand, the apartment vacancy rate in Orange County fell to 4.2% in 1995
(see Table 1.10). High levels of new construction, however, caused the vacancy
rate to increase to 5% in the spring of 1996. This increase in vacancy is not a
sign of weakness in the market. Rather, it alleviates unnaturally tight market
conditions and allows for the normal turnover of tenants. Also attesting to the
strength of the market, asking rents in apartment projects are rising more
quickly than during any year since 1991, despite the recent increase in vacancy.
- -------------------------------------------------------------------------------------------------------------
TABLE 1.10
HISTORICAL TRENDS IN ORANGE COUNTY'S APARTMENT MARKET
1989 1990 1991 1992 1993 1994 1995 1996e
---- ---- ---- ---- ---- ---- ---- -----
Total Stock 90,592 93,531 96,498 97,172 97,982 97,692 99,451 101,186
New Construction 5,871 2,939 2,967 674 810 (290) 1,759 1,735
Net Absorption 3,017 2,863 (516) 1,458 (767) 1,978 853
Occupied Stock 87,240 90,257 93,121 92,605 94,063 93,296 95,274 96,127
Vacancy Rate 3.7% 3.5% 3.5% 4.7% 4.0% 4.5% 4.2% 5.0%
Avg. Asking Rent $751 $773 $794 $778 $775 $782 $781 $802
% Change 2.9% 2.7% -2.0% -0.4% 0.9% -0.1% 2.7%
Sources: Historical data-Research Network Ltd.; Calculations and forecasts-RCG.
- -------------------------------------------------------------------------------------------------------------
Submarket vacancy rates in Orange County range from less than 2% in Seal Beach,
La Palma, and Cypress to 17.1% in Rancho Santa Margarita and 8.8% in Irvine. The
submarkets mentioned above with the lowest vacancy rates are all small markets
with a small rental stock. During the past year, vacancy rates have fallen in
about half of the submarkets. La Palma experienced the greatest improvement in
apartment vacancy, followed by Los Alamitos, Stanton and Mission Viejo. The
submarkets which experienced the greatest increase in apartment vacancy were
Rancho Santa Margarita and Irvine, both communities which have had a significant
amount of new apartment construction.
Average county-wide apartment rent growth during the past year was 2.7%. Seal
Beach not only has the lowest apartment vacancy rate, but it also has the
highest apartment rent in the county. Other submarkets with high apartment rent
levels include Newport Beach, Irvine, and Aliso Viejo. During the past year,
apartment rents increased the most in Rancho Santa Margarita, Stanton and Lake
Forest. Laguna Hills was the weakest market in terms of apartment rent growth.
Apartment construction activity has been strong into 1996, with an estimated
1,735 new apartment units scheduled for completion during the year. This level
of apartment construction activity is on par with 1995, and it is well above
apartment construction completions since 1991. In fact, during 1994, building
completions are reported as negative because the 325-unit Monarch Hills project,
formerly managed by Sares-Regis, was converted from apartments to condominiums
and taken off the market.
Rosen Consulting Group 12
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The most active single developer in Orange County is Irvine Apartment
Communities (IAC), a publicly traded real estate investment trust. During the
first quarter of 1996, IAC completed two apartment projects totaling 746 units,
and IAC had an additional 1,689 apartment units under construction or proposed
(see Table 1.11). Most of these projects are located in Irvine. Unincorporated
parts of the county are the next most popular location for IAC's new apartment
construction.
The largest single apartment project under construction is IAC's Villa Coronado.
Most of the 513 units in this project have been completed. In addition, IAC has
completed about half of the 512 units in its Newport Ridge project. Other large
projects are Rancho Monterey in Tustin with 436 units and Rancho Santa Fe with
350 units, also in Tustin. Both of these are IAC projects. The largest single
project under construction that is not an IAC project is Villas Antonio, a
316-unit project being developed by Santa Margarita Realty Company in Rancho
Santa Margarita.
- ------------------------------------------------------------------------------------------------------------------
TABLE 1.11
ORANGE COUNTY CONSTRUCTION PIPELINE
UNDER
PROJECT LOCATION DEVELOPER COMPLETED CONSTRUCTION TOTAL
- ------- -------- --------- --------- ------------ -----
Villa Coronado Irvine Irvine Apartment Communities 483 30 513
Santa Rosa Irvine Irvine Apartment Communities 368 0 368
Santa Clara Irvine Irvine Apartment Communities 378 0 378
Rancho Monterey Tustin Irvine Apartment Communities 323 113 436
Newport Ridge Unincorporated Irvine Apartment Communities 298 214 512
Baypointe Newport Beach Irvine Apartment Communities 300 300
Santa Maria Irvine Irvine Apartment Communities 227 227
The Colony Newport Beach Irvine Apartment Communities * 245 245
Santa Rosa II Irvine Irvine Apartment Communities * 210 210
Rancho Santa Fe Tustin Irvine Apartment Communities * 350 350
Subtotal 1,850 1,689 3,539
Villas Antonio Rancho Santa Margarita Santa Margarita Realty Co. 316
One Park Place Apts. Newport Beach William Lyon Company 216
Eastridge Apt. Homes Orange Tracy Department 128
Arroyo Vista A.F. Evans A.F. Evans 156
Sonterra Foothill Ranch Westwood Residential 300
Total 4,655
* Scheduled to commence construction in 1996
Sources: Irvine Apartment Communities, Form 10-K; Real Facts
- ------------------------------------------------------------------------------------------------------------------
Rosen Consulting Group 13
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The ratio of new households created to multifamily permits issued has been
higher in the 1990s than it was in the 1980s (see Figure 1.2). On average, one
multifamily permit was issued for every 3.2 households formed between 1990 and
1996, compared to a ratio of one permit for every 2.1 households created in the
1980s. While not all of the new households rented, we believe that the ratio of
new supply to demand has been low in the 1990s. However, this situation is
changing, as seen in the 1996 estimated ratio of households to multifamily
permits. Although the number of households created is growing, increased
construction activity is causing the ratio to fall.
- --------------------------------------------------------------------------------
FIGURE 1.2
- --------------------------------------------------------------------------------
NEW HOUSEHOLDS TO MULTI-FAMILY PERMITS
ORANGE COUNTY
--------------------------------------
[GRAPHIC OMITTED]
Sources: Historical data-US Census Bureau: Calculations and forcasts-RCO
Additions to supply should cause the apartment vacancy rate to rise through
1997, as new supply outpaces demand (see Table 1.12). However, by 2000, we
anticipate that a strengthening economy will cause absorption to increase
substantially. As a result, the apartment vacancy rate will fall below 4%, while
rent growth accelerates to more than 4% per year.
- ---------------------------------------------------------------------------
TABLE 1.12
FORECASTED TRENDS IN ORANGE COUNTY'S APARTMENT MARKET
1996e 1997f 1998f 1999f 2000f
Total Stock 101,186 103,136 105,286 107,736 110,386
New Construction 1,735 1,950 2,150 2,450 2,650
Net Absorption 853 1,400 2,600 2,850 3,075
Occupied Stock 96,127 97,527 100,127 102,977 106,052
Vacancy Rate 5.0% 5.4% 4.9% 4.4% 3.9%
Avg. Asking Rent $802 $823 $848 $878 $914
% Change 2.7% 2.6% 3.1% 3.6% 4.1%
Sources: Research Network Ltd, RCG
- ---------------------------------------------------------------------------
Rosen Consulting Group 14
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- --------------------------------------------------------------------------------
Santa Clara County
- --------------------------------------------------------------------------------
RECENT ECONOMIC TRENDS
Santa Clara County, which is coterminous with the San Jose metropolitan area,
has enjoyed a surge in employment growth during 1995 after six years of weak to
negative employment growth. The booming high technology industry in Silicon
Valley has triggered growth in other employment sectors, causing the Santa Clara
County economy to strengthen during each of the past two years. Following
employment growth of 3.5% during 1995, Santa Clara's economy grew 5.0% between
April of 1995 and 1996 (see Table 2.1). We expect Santa Clara's economy to be
moderately strong during each of the next three years.
The Manufacturing Sector
Manufacturing is the driving force behind the Santa Clara County economy, and
more than 90% of manufacturing sector employment is concentrated in the durable
goods sector. The manufacturing sector rebounded in 1995 with growth of 1.6%
after contracting 2.5% in 1994. As of April of 1996, manufacturing employment is
up a dramatic 6.6% on average compared to April of 1995. The growth in the
manufacturing sector disguises the significant restructuring and revolution
which is occurring in the industries which comprise this sector. While the
consumer electronics industry and related industries in other sectors (for
instance, software, which is classified as a service sector) are booming, other
manufacturing industries continue to shrink. Table 2.1 illustrates the vast
differences in growth patterns within the durable goods manufacturing industry
in Santa Clara County. Employment in communications equipment and other
electronic goods was up 7.0% during 1995, while transportation equipment
employment declined 10.5%, the latest in a string of losses dating back to the
late 1980s. The net result of this dramatic transformation which is taking place
within Santa Clara's manufacturing sector is that its manufacturing base is
becoming much more entrepreneurial and commercially-oriented, while its
dependence on government contracts has become much less significant.
During late 1994 and early 1995, the strong demand for semiconductor chips and
the consumer electronic products which have become increasingly dependent on
chips jump-started the Silicon Valley economic recovery. However, during the
past year, growth has spread to other high technology sectors such as software,
networking and the increasingly wide array of computer peripherals. As a result,
employment in durable goods grew at a fast pace of 7.8% during the year ending
in April 1996, and business services, of which software is a component, grew at
a strong 13.1% rate. Construction employment has also benefited from the recent
strength in the Santa Clara County economy, growing at a rate of 11.6% during
the year ending in April.
The high concentration of employment in the durable goods manufacturing sector
serves the metropolitan economy well since durable goods manufacturing jobs are
generally high-paying, moderate-skill jobs. In addition, because durable goods
manufacturing is export-producing, it brings earnings into the local economy,
instead of being population-serving, like many industries in the services
sector.
Rosen Consulting Group 15
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TABLE 2.1
SANTA CLARA COUNTY EMPLOYMENT DETAIL
1989 1990 1991 1992 1993 1994 1995 Apr-96 1996f
Total Nonagricultural 809.3 814.5 805.8 792.1 796.6 799.9 828.0 857.7 872.9
% Change 0.7% 0.6% -1.1% -1.7% 0.6% 0.4% 3.5% 5.0% 5.4%
Construction 29.2 29.5 28.1 27.3 26.1 26.4 27.6 28.9 32.1
% Change 1.7% 1.0% -4.7% -2.8% -4.4% 1.1% 4.5% 11.6% 16.3%
Manufacturing 262.5 258.2 251.5 236.8 231.7 226.0 229.6 240.3 244.0
% Change 1.0% -1.6% -2.6% -5.8% -2.2% -2.5% 1.6% 6.6% 6.3%
Durable Goods 235.5 231.1 224.4 210.2 205.6 200.5 205.5 217.8
% Change 1.1% -1.9% -2.9% -6.3% -2.2% -2.5% 2.5% 7.8%
Industrial 63.6 63.3 64.6 56.9 57.3 56.1 59.7 63.6
% Change 5.8% -0.5% 2.1% -11.9% 0.7% -2.1% 6.4% 8.9%
Computer 55.5 54.6 55.9 47.6 47.3 44.8 46.0 47.5
% Change 6.7% -1.6% 2.4% -14.8% -0.6% -5.3% 2.7% 4.4%
Electronic 84.9 83.4 79.7 76.9 76.1 75.5 79.0 86.2
% Change -1.0% -1.8% -4.4% -3.5% -1.0% -0.8% 4.6% 12.1%
Transportation 30.5 29.1 26.8 24.3 20.4 17.2 15.4 14.6
% Change -2.9% -4.6% -7.9% -9.3% -16.0% -15.7% -10.5% -5.8%
Aircraft & Space 25.8 24.7 22.9 20.8 17.5 14.3 13.0 12.5
% Change -2.3% -4.3% -7.3% -9.2% -15.9% -18.3% -9.1% -3.8%
Instruments 44.9 43.6 42.4 41.7 40.6 39.8 38.8 40.1
% Change 3.5% -2.9% -2.8% -1.7% -2.6% -2.0% -2.5% 4.2%
Search & Navig 10.7 10.2 9.7 9.2 8.2 7.6 7.0 6.9
% Change 0.0% -4.7% -4.9% -5.2% -10.9% -7.3% -7.9% -1.4%
Measuring Dev 28.1 26.7 25.4 24.4 23.9 24.1 24.4 25.7
% Change 5.2% -5.0% -4.9% -3.9% -2.0% 0.8% 1.2% 6.6%
T.C.P.U. 21.5 22.2 22.6 22.4 23.6 23.8 23.9 24.2 24.6
% Change -1.4% 3.3% 1.8% -0.9% 5.4% 0.8% 0.4% 3.0% 2.9%
Trade 169.7 169.0 165.0 158.6 157.7 160.3 167.6 171.4 174.9
% Change 1.2% -0.4% -2.4% -3.9% -0.6% 1.6% 4.6% 4.4% 4.4%
Wholesale Trade 53.5 52.9 50.4 47.2 45.5 46.0 49.6 52.0
% Change 3.9% -1.1% -4.7% -6.3% -3.6% 1.1% 7.8% 6.8%
Retail Trade 116.3 116.1 114.6 111.4 112.2 114.3 118.1 119.4
% Change 0.1% -0.2% -1.3% -2.8% 0.7% 1.9% 3.3% 3.5%
F.I.R.E. 30.7 31.6 31.5 31.5 31.5 30.0 28.7 28.3 28.1
% Change 0.0% 2.9% -0.3% 0.0% 0.0% -4.8% -4.3% -1.7% -2.1%
Services 208.6 214.4 217.7 226.6 237.9 245.1 263.7 277.0 282.4
% Change 0.0% 2.8% 1.5% 4.1% 5.0% 3.0% 7.6% 6.2% 7.1%
Business Services 56.4 58.0 59.0 65.5 74.2 81.9 94.8 103.6
% Change -0.5% 2.8% 1.7% 11.0% 13.3% 10.4% 15.8% 13.1%
Health Services 38.5 40.0 42.1 43.4 43.6 45.2 47.3 47.7
% Change 1.0% 3.9% 5.3% 3.1% 0.5% 3.7% 4.6% 1.7%
Engin & Mgm't 34.8 35.1 35.1 35.0 35.6 32.8 34.1 35.6
% Change -1.1% 0.9% 0.0% -0.3% 1.7% -7.9% 4.0% 5.3%
Total Government 86.9 89.4 89.1 88.8 87.9 88.3 86.8 87.5 86.5
% Change 0.6% 2.9% -0.3% -0.3% -1.0% 0.5% -1.7% -0.3% -0.3%
Sources: Historical data-Bureau of Labor Statistics:
Calculations and forecasts-RCG
Rosen Consulting Group 16
25
The computer industry, which is the most concentrated industry in the county,
has thrived during the past several years. Semiconductor companies such as
Intel, National Semiconductor, and Advanced Micro Devices have experienced
dramatic growth in output and profitability. Intel alone hired aggressively
during 1995 in an effort to keep up with the increasing demand for its Pentium
microprocessors, and although industry-wide book-to-bill ratios have dropped to
below 1.0 during the first five months of 1996 (see Figure 1.1), chip
fabrication plant construction is at a peak. Intel has completed a $500 million
expansion to its chip manufacturing facility on Mission College Boulevard in
Santa Clara, called D2, and is now ramping up production on a new process for
.25 and .18 micron processors. Intel has also recently acquired land on which to
build a new 550,000 square-foot office building adjacent to its headquarters in
Santa Clara, although construction on the site is not currently underway. Atmel,
Hyundai Electronics, and Altera, which also manufacture semiconductor chips,
have all recently acquired land in the northern San Jose region for future
development. This recent dramatic increase in demand for land has caused
industrial land prices to double during the last year or so in the San Jose
area.
The decline in the book-to-bill ratio is the result of several factors, most of
which relate to supply, as opposed to declining demand. First, an inventory glut
of chips resulted from makers of personal computers overestimating demand at the
end of last year. Computer makers are now working through their existing
inventory of chips. Second, with personal computers being the largest single
source of demand for chips, the slowdown in personal computer sales has reduced
the underlying demand for chips. Third, the price of chips has declined because
of competition in the industry, resulting from the addition of a substantial
amount of new chip-making capacity. Intel alone has six chip fabrication plants
underway, including two in the Southwest (Chandler, AZ and Rio Ranch, NM, which
will be producing in 1997). Another plant in Hillsboro, OR, will also be ready
in 1997, a flash fab plant in Israel will be ready for production in late 1997,
and another fab plant in Ireland should be completed in 1998. On the demand
side, Dataquest continues to forecast personal computer demand growth of 18% to
20% per year through the year 2000, and in its May of 1996 Semiconductor
Forecast Summary, the Semiconductor Industry Association forecasted a 7.8%
increase in semiconductor chip shipments in the Americas in 1996, increasing to
9.2% in 1997 and 15.7% in 1998.
- --------------------------------------------------------------------------------
FIGURE 2.1
- --------------------------------------------------------------------------------
Book-to-Bill Ratio
Three Month Moving Average
-----------------------------------
[GRAPHIC OMITTED]
Source: Semiconductor Industry Association
Rosen Consulting Group 17
26
The strong growth in chip demand through 1995 has caused ripple effects through
the Santa Clara, southern San Mateo and southern Alameda County economies.
Semiconductor shipments increased 30% during each of 1994 and 1995. Eight of the
eleven largest semiconductor firms are based in Santa Clara County, suggesting
that a high percentage of the U.S.'s share of the market flowed from Santa Clara
County (while most of the engineering, software programming and research jobs
are located in Santa Clara County, the manufacturing jobs are often located
elsewhere). As a result of this strong growth in chip demand, the demand for new
semiconductor plants and equipment skyrocketed. The semiconductor equipment
industry experienced a dramatic growth in demand, with 25 to 30 new
semiconductor plants being built every year. Semiconductor equipment
manufacturers rely heavily on technical labor, which increases their need to be
in markets like the Silicon Valley with a large pool of technical labor. Total
employment at Applied Materials, the world's largest semiconductor equipment
company, increased from 6,500 in 1994 to 10,500 in 1995. Much of this increase
occurred in the Bay Area, where the company has completed two new facilities
since early 1995, including a new building at its central campus, as well as the
Applied Komatsu facility for its joint venture with Komatsu. KLA Instruments in
San Jose has 2,100 employees, and the company expects to add 600 more by the end
of the third quarter of 1996. In addition, Tencor Instruments, the Mountain
View-based manufacturer of chip equipment, acquired LSI Logic's 34-acre parcel
in Milpitas and began construction in December of 1995 on its new five-building,
500,000 square-foot corporate headquarters and manufacturing complex. The Tencor
project is expected to be completed in late 1996, and by March of 1997, 1,400
employees will be working in the new facility, 175 to 200 of which will be new
hires.
Companies located in Santa Clara County lead worldwide not only in the research,
development and sale of semiconductors, but also in computer workstations, disk
drives and networking hardware. Silicon Graphics of Mountain View increased Bay
Area employment by 2,200 during the past year. The company is currently building
a 500,000 square-foot corporate campus. The first two buildings will be
completed by October of 1996, and the second two buildings will be completed in
1997. However, with its recent acquisition of Cray Computers, Silicon Graphics
does not expect to do more than normal hiring in 1996. IBM employs 7,000 in
Santa Clara County, including 5,000 at its Storage Systems Division, which is
headquartered in San Jose. Employment in Santa Clara County has been stable for
the past year and is expected to be stable through at least the end of 1996. IBM
decided not to vacate several buildings which it owned, totaling nearly one
million square feet of space. The company is currently investing $500 million
worldwide in its storage technology business. Cisco Systems, which makes
networking hardware, acquired 130-acres of land in north San Jose in April of
1996 for future expansion. Cisco plans to hire more than a total of 1,000
employees during the next several years.
The outlook for defense-related companies in Santa Clara County is improving,
following years of declining employment. Lockheed Martin's Sunnyvale operation,
which employed just under 10,000 in March of 1996, was once Sunnyvale's largest
employer with 25,000 employees in 1986. Downsizing continues in some areas, such
as the Trident II missile program, which has contracts at least through 2000.
However, Lockheed Martin is currently consolidating its space and strategic
missile sector in Sunnyvale and Denver. As Sunnyvale picks up satellite programs
from closed facilities on the east coast, local employment should increase by
approximately a total of 3,500 by early 1999. The company is currently testing
the Theater High Altitude Area Defense (THAAD), which is the next generation of
the Patriot missile and protects a larger area than the Patriot. In addition, as
United Defense L.P., formerly FMC, has shifted its business strategy, it has won
additional contracts. United Defense is adding engineering support but cutting
manufacturing for an average head count of 1,656 during 1996.
Rosen Consulting Group 18
27
Other Sectors of the Santa Clara Economy
Defense budget cutbacks continue to affect military bases, which will contribute
to future weak growth in government employment. Onizuka Air Force Base in
Sunnyvale will downsize by approximately 50% by 2000, resulting to the
elimination of approximately 1,500 jobs. The NASA Ames Research Center is also
slated for cutbacks. The current strategy is to eliminate 300 of the 1,700 civil
servants at the site and to cut the number of support service contractors in
half from 2,300 to 1,150. The reductions are expected to take place by the year
2000.
The high level of manufacturing sector output has contributed to an increase in
Pacific Rim trade. Wholesale trade in Santa Clara County increased 6.8% between
April of 1995 and 1996, fueled by trade with the Pacific Rim countries. Pacific
Rim countries account for approximately three-quarters of total trade activity
to and from California, a proportion which will undoubtedly grow over the next
decade because of the fast growth in U.S. trade volume with these countries.
Retail trade, which comprises 70% of trade sector jobs, posted a strong gain of
3.5% during the same period, bringing the overall trade sector gain to 4.4% for
the year ending in April of 1996.
Santa Clara County also has a high concentration in service sector employment,
particularly educational and business services. Some of this concentration owes
to the presence of Stanford University, which, along with other local colleges
and universities, has produced a highly-educated labor pool that provides
engineers and other professionals for the high technology industry. However, by
far the largest and most dynamic portion of the service sector in Santa Clara
County is business services. Business services employs approximately 100,000 in
Santa Clara County, which represents more than a third of the services sector
and more than 12% of the employment base. The size of the business services
sector is largely attributable to the software industry. Software companies,
such as Adobe Systems, have been expanding at a strong rate during the last few
years, fueled by advances in chip technology and computer memory capacity. Adobe
is building a second headquarters building in the San Jose central business
district. When the facility is completed, Adobe will relocate 1,100 employees
from Mountain View, and it plans to eventually employ 2,200 at the new complex.
Another vibrant industry within business services is temporary employees. Many
high tech companies rely extensively on temporary employees so as to be able to
quickly adjust employment levels to meet their needs.
The creation of hundreds of new high technology businesses has attracted a vast
and sophisticated infrastructure of financial and legal service companies to
Santa Clara County. As a result, legal services has been a rapidly growing
component of the services sector. Many of the nation's largest law firms have
branch offices in Palo Alto, as a result of the large number of initial public
offerings which Silicon Valley's entrepreneurial culture generates. The
epicenter of much of the high technology activity is the Stanford Research Park
in Palo Alto, which is the home of a number of high technology companies, as
well as several law firms. One of these law firms, Wilson, Sonsini, Goodrich &
Rosati is, by far, the largest law firm in Palo Alto with approximately 750
employees. The Stanford Research Park is also home to companies in other
industries such as biosciences. Shaklee Corporation, the pharmaceutical giant,
will break ground on its new research center in the Stanford Research Park in
July of 1996. Completion of the two buildings, totaling 75,000 square feet,
where Shaklee will develop new technology for nutritional and pharmaceutical
compounds, is slated for September of 1997. Shaklee will initially employ about
40 people at the complex.
Rosen Consulting Group 19
28
FORECASTED EMPLOYMENT TRENDS
Employment growth in San Jose will be strong during the next year, with
employment growth exceeding 5% during 1996. We do not believe that the economy
can maintain such a strong rate of growth for long, and as a result, we expect
to see slower rates of employment growth thereafter (see Table 2.2). While
demand for personal computers and chips will remain moderately strong over the
forecast horizon, we do not expect that the high technology industry will be
able to maintain its recent rate of growth.
Longer term growth in San Jose will depend on further expansion in the computer,
electronics and biotechnology industries. Growth in these core industries brings
billions of additional dollars and, as a result, tens of thousands of new jobs
in related sectors such as trade and services to the local economy. Actually,
many of the jobs associated with the research and design of new high technology
products are service sector jobs, including engineering and software
development. These jobs are all highly-skilled positions which command high
salaries.
The qualities which enabled Santa Clara County to become a world center of the
computer and consumer electronics industry (world class educational institutions
and an entrepreneurial culture) will continue to fuel entrepreneurial activity
in Silicon Valley. Technological revolution seems to be ongoing in Silicon
Valley, with current activity focusing on the fusion of technologies from
multiple industries. While most of the new fusion technologies are in the early
stages of development, they promise to attract new entrepreneurs, create new
markets and business opportunities, and to bring new workers to Silicon Valley.
TABLE 2.2
SANTA CLARA COUNTY EMPLOYMENT FORECAST
1992 1993 1994 1995 1996f 1997f 1998f 1999f 2000f
---- ---- ---- ---- ----- ----- ----- ----- -----
Total Nonagricultural 792.1 796.6 799.9 828.0 872.9 903.6 931.2 938.0 965.2
% Change -1.7% 0.6% 0.4% 3.5% 5.4% 3.5% 3.1% 0.7% 2.9%
Construction 27.3 26.1 26.4 27.6 32.1 33.8 35.6 35.2 36.1
% Change -2.8% -4.4% 1.1% 4.5% 16.3% 5.3% 2.0% -1.0% 2.5%
Manufacturing 236.8 231.7 226.0 229.6 244.0 247.2 249.5 244.5 251.8
% Change -5.8% -2.2% -2.5% 1.6% 6.3% 1.3% 0.9% -2.0% 3.0%
T.C.P.U. 22.4 23.6 23.8 23.9 24.6 25.3 25.8 26.9 26.2
% Change -0.9% 5.4% 0.8% 0.4% 2.9% 2.8% 2.0% 0.5% 1.0%
Trade 158.6 157.7 160.3 167.6 174.9 181.2 187.4 186.5 189.8
% Change -3.9% -0.6% 1.6% 4.6% 4.4% 3.6% 3.4% -0.5% 1.8%
F.I.R.E. 31.5 31.5 30.0 28.7 28.1 29.3 30.4 30.7 31.3
% Change 0.0% 0.0% -4.8% -4.3% -2.1% 4.3% 3.8% 1.0% 2.0%
Services 226.6 237.9 245.1 263.7 282.4 298.7 314.3 326.2 339.9
% Change 4.1% 5.0% 3.0% 7.6% 7.1% 5.8% 5.2% 3.8% 4.2%
Total Government 88.8 87.9 88.3 86.8 86.5 87.5 87.8 88.5 89.6
% Change -0.3% -1.0% 0.5% -1.7% -0.3% 1.2% 0.3% 0.8% 1.2%
Sources: Historical data-Bureau of Labor Statistics; Calculations and forecasts-RCG.
Rosen Consulting Group 20
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DEMOGRAPHIC TRENDS
The dramatic turnaround which the Santa Clara County economy has experienced
during the last year or so has caused population growth to accelerate. The most
direct influence which stronger job market trends have on population growth is
that as new positions are created, households move into the area to fill the
jobs. However, population growth also accelerates because of an increased level
of births, due to the greater job certainty experienced by employed people. In
Santa Clara County, population growth has averaged 1.5% for each year between
1980 and 1990, above the national average of 0.9% for each year over the same
period (see Table 2.3). Due to weak economic conditions during the early 1990s,
average population growth slowed to approximately 1.3% for each year from 1990
to 1995, representing the addition of a total of slightly under 100,000 new
residents for the entire period. With the strong recovery which has occurred in
the Santa Clara County economy during the last eighteen months, we expect job
growth will accelerate to at least 1.4% per year during the 1995 to 2000 period,
representing the addition of a total of about 110,000 new residents for the
entire period.
The historical and forecasted age distribution data reflects the rapid growth in
the 45 to 54 and 55 to 59 year-old age categories during the 1990s as those born
during the post-World War II baby-boom enter that age group. These population
trends have significance for household formation and the decision of whether to
own or rent, also called tenure choice.
- ---------------------------------------------------------------------
TABLE 2.3
SANTA CLARA COUNTY POPULATION BY AGE
AGE GROUP 1980 1990 1995 2000
- --------- ---- ---- ---- ----
19 & Under 409,466 404,578 442,100 473,500
20-24 133,172 125,178 110,300 111,900
25-34 243,550 316,883 307,600 310,500
35-44 172,994 244,694 271,100 274,800
45-54 133,619 163,214 187,500 222,100
55-64 105,637 112,712 128,200 150,900
65+ 96,635 130,318 148,100 162,200
TOTAL 1,295,073 1,497,577 1,594,900 1,705,900
COMPOUND ANNUAL GROWTH RATE
----------------------------------
AGE GROUP 1980-1990 1990-1995 1995-2000
- --------- --------- --------- ---------
19 & Under -0.1% 1.8% 1.4%
20-24 -0.6% -2.5% 0.3%
25-34 2.7% -0.6% 0.2%
35-44 3.5% 2.1% 0.3%
45-54 2.0% 2.8% 3.4%
55-64 0.7% 2.6% 3.3%
65+ 3.0% 2.6% 1.8%
TOTAL 1.5% 1.3% 1.4%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
- ----------------------------------------------------------------------------
Drivers license data illustrates the population growth trends mentioned above.
Net migration, a major contributor to population growth, was negative between
fiscal year 1989-1990 to fiscal year 1993-1994 (see Table 2.4). In the 1995 to
2000 time period, we believe that Santa Clara will experience a low level of
in-migration as the economy continues to create more jobs than there are
residents to fill them. This will help to maintain population growth at an
average of 1.4% per year through 2000.
Rosen Consulting Group 21
30
TABLE 2.4
SANTA CLARA COUNTY DRIVERS LICENSE MIGRATION DATA
Estimated Net
Fiscal Net Drivers Population
Year Drivers to: Drivers from: In (Out) In (Out)
- ------ ----------- ------------- ----------- -------------
89-90 66,540 78,510 (11,970) (17,955)
90-91 65,011 75,915 (10,904) (16,356)
91-92 62,504 72,327 (9,823) (14,735)
92-93 55,021 65,023 (10,002) (15,003)
93-94 66,201 71,133 (4,932) (7,398)
94-95 72,239 64,874 7,365 11,048
Sources: Historical Data-California Department of Motor Vehicles Driver License
Address Change Report-August 1990-1995; Calculations-RCG.
Household growth has recovered more strongly than population growth during the
past year or so, for two principal reasons. Stronger economic conditions have
caused people to become more confident about the economy which, in turn, has led
people who may have lived with roommates or extended family to form their own
households. In addition, many of the new jobs being created are for younger
employees, who tend to create single-person households. As a result, household
formation averaged roughly 0.9% per year during the first half of the 1990s, but
will accelerate to approximately 1.2% per year during the 1995 to 2000 period
(see Table 2.5). Based on our economic and demographic projections, during the
1995 to 2000 period, we anticipate that more than 33,000 new households will be
formed, creating substantial new demand in the residential markets.
TABLE 2.5
SANTA CLARA COUNTY HOUSEHOLDS BY AGE
Compounded Annual Avg Growth
----------------------------
Age Groups 1990 1995 2000 1990-1995 1996-2000
- ---------- ---- ---- ---- --------- ---------
15-24 22,888 21,859 21,788 -0.9% -0.1%
25-34 134,727 135,589 137,998 0.1% 0.4%
35-44 128,484 131,190 135,971 0.4% 0.7%
45-54 93,112 101,098 111,882 1.7% 2.0%
55-64 64,502 72,436 82,132 2.3% 2.5%
65+ 76,466 81,398 86,994 1.3% 1.3%
Total 520,179 543,570 576,765 0.9% 1.2%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
Rosen Consulting Group 22
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AFFORDABILITY, TENURE CHOICE, AND THE DEMAND FOR RENTAL UNITS
Like most of the San Francisco Bay Area, Santa Clara County is an expensive
housing market. The median existing home price as of year-end 1995 was $253,372
compared to a national median home price in 1995 of $112,900 (see Table 2.6).
The percentage of households able to afford the median-priced home in Santa
Clara County has increased dramatically during the last five years, primarily
owing to the rapid rise in household incomes relative to home prices, but also
to declining mortgage interest rates. However, while housing has become more
affordable in recent years in Santa Clara County, it still remains very
expensive. In 1995, only 42.9% of Santa Clara's households can afford the
median-priced home compared to 54.8% nationally.
The low level of housing affordability bodes well for rental housing demand. As
of the 1990 Census, 40.9% of the households in Santa Clara County rented,
compared with 35.8% for the nation as a whole. The high proportion of renters is
also attributable to a relatively young population base with a higher propensity
to rent. In addition, some people make a lifestyle decision to rent because it
offers increased flexibility without the responsibilities of home-ownership.
Recent trends in the luxury apartment market suggest that people are choosing to
rent increasingly because they can rent a higher quality home with more
amenities than they could purchase and without the responsibilities of
home-ownership.
TABLE 2.6
AFFORDABILITY DATA
SANTA CLARA COUNTY AND THE UNITED STATES
1990 1991 1992 1993 1994 1995 1996a
---- ---- ---- ---- ---- ---- -----
Median Existing Home Price
- --------------------------
Santa Clara County $268,890 $256,640 $248,260 $246,510 $254,390 $253,372 $260,878
% Change -2.3% -4.6% -3.3% -0.7% 3.2% 1.5% 3.2%
United States $95,500 $100,300 $103,700 $106,800 $109,800 $112,900 $117,500
% Change 2.6% 5.0% 3.4% 3.0% 2.8% 2.8% 4.1%
Household Income
- ----------------
Santa Clara County $70,700 $73,000 $77,300 $79,200 $83,500 $87,400 $92,500
% Change 5.7% 3.3% 5.8% 2.5% 2.8% 2.9% 4.0%
United States $37,403 $37,922 $39,020 $41,428 $43,845 $45,999
% Change 2.4% 1.4% 2.9% 6.2% 5.8% 4.9%
Mortgage Int. Rate 10.1% 9.2% 8.4% 7.3% 8.4% 8.0% 7.5%
- ------------------
Households Able to Afford Median-Priced Home
- --------------------------------------------
Santa Clara County 19.1% 26.4% 35.2% 41.9% 38.1% 42.9% 49.2%
United States 50.0% 51.0% 55.0% 58.0% 57.0% 54.8%
Source: Historical data-National Association of Realtors, Federal Reserve Board
of Governors, U.S. Bureau of the Census; Calculations and 1996 estimate-RCG.
Rosen Consulting Group 23
32
To summarize, although we forecast only a modest rate of increase in population
and households for Santa Clara County during the next five years, more than
33,000 new households will be created. Due to the high growth rate of households
in the older age groups, which typically choose to own versus rent, a lower
proportion of the new households (i.e. 30% thereof) will rent. However, because
of the current strong growth in population and households, apartment demand
growth will remain strong, in the range of 10,000 units over the next five
years, or just under 2,000 units per year.
TABLE 2.7
PROJECTION OF APARTMENT DEMAND BY AGE
SANTA CLARA COUNTY
Change in
1990 1995 2000 Households Renter New
Age Groups Households Households Households 1995-2000 Proportion Rental Units
- ---------- ---------- ---------- ---------- ---------- ---------- ------------
15-24 22,888 21,859 21,788 (71) 90.0% (64)
25-34 134,727 135,589 137,998 2,409 62.7% 1,510
35-44 128,484 131,190 135,971 4,781 40.4% 1,932
45-54 93,112 101,098 111,882 10,784 25.8% 2,782
55-64 64,502 72,436 82,132 9,696 20.2% 1,959
65+ 76,466 81,398 86,994 5,596 25.5% 1,427
Total 520,179 543,570 576,765 33,195 28.6% 9,494
Sources: Historical data - U.S. Census Bureau; Calculations and
forecasts - RCG.
Rosen Consulting Group 24
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APARTMENT MARKET TRENDS
Current strong job growth has fueled the recent growth in demand for apartment
units, which, in turn, has in 1995 increased net absorption and pushed the
vacancy rate for projects with more than 100 units down to their lowest level
since 1986. At year-end 1995, the apartment vacancy rate in Santa Clara County
was 2.2%, a dramatic decline from 4.3% in 1994 (see Table 2.8). As a result of
the dramatic growth in apartment demand and low rental vacancy rates in 1995,
Santa Clara County apartment rents jumped 9.6% in 1995 from $886 per unit to
$971 per unit.
TABLE 2.8
SANTA CLARA COUNTY APARTMENT MARKET TRENDS (100+ UNITS)
1987 1988 1989 1990 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------------------------------------
Total Stock 42,880 45,548 46,658 48,209 50,382 50,748 50,934 50,934 51,606
New Construction 1,497 2,668 1,110 1,551 2,173 366 186 0 672
Net Absorption 1,464 3,014 1,281 1,348 2,057 16 (630) 306 1,763
Occupied Stock 41,332 44,346 45,627 46,975 49,032 49,048 48,418 48,723 50,486
Vacancy Rate 3.6% 2.6% 2.2% 2.6% 2.7% 3.4% 4.9% 4.3% 2.2%
Average Rent $747 $770 $807 $842 $870 $864 $887 $886 $971
Avg. Rent Change -0.5% 3.1% 4.8% 4.3% 3.3% -0.7% 2.7% -0.1% 9.6%
Sources: New construction, vacancy, avg. rent, & stock-RealData; Net absorption & occupied stock calculations-RCG.
While all of Santa Clara County's apartment submarkets are tight, the areas with
the lowest vacancy rates at year-end 1995 were the cities of Los Gatos,
Cupertino and Milpitas. Campbell, on the other hand, experienced an increase in
vacancy during 1995 because of the addition of 348 units at Canyon Creek (owned
by Bay Apartment Communities) during the first half of 1995. On a per square
foot basis, rents were highest at year-end 1995 in Palo Alto, Los Altos, and
Sunnyvale.
According to a year-end 1995 apartment survey of buildings with more than 100
units conducted by RealData, vacancy rates are extremely low in both Class A and
Class B buildings in the major rental submarkets in Santa Clara County, although
evidence suggests that Class A vacancy rates are slightly lower. While RealData
does not classify buildings as Class A or B, using proxies such as the age of
the building and its average rent relative to the city average, we found that in
most of the county's submarkets, specifically in Campbell, Cupertino, Milpitas,
Mountain View and Palo Alto, vacancy rates were slightly lower in newer projects
where rents were above the city average for those buildings surveyed. For
instance in Campbell, those projects built before 1975 had a rental vacancy rate
of 3.4% compared to 1.6% for projects constructed after 1975.
Current low vacancy rates and strong rent growth are spurring apartment
construction. Apartment building completions were at their highest level in 1995
than in any year since 1991. Bay Apartment Communities, Inc. (BAC) completed two
projects in Campbell and San Jose totaling 672 units during 1995. Illustrating
the strength of the apartment market, by mid-October 1995, BAC reported 98%
occupancy at the two projects.
Rosen Consulting Group 25
34
Recent construction activity has not kept pace with growth in households in
Santa Clara County. As Figure 2.2 shows, far fewer permits were issued for new
construction in 1994 and 1995 than new households were created. This situation
has led to the tightening market conditions and the very low current vacancy
rate. Given the large pipeline of new construction, we expect the ratio of new
households to multifamily permits to drop during the next three years.
The large pipeline of new construction in Santa Clara County will alleviate
tight market conditions during the next several years. Almost 700 units are
scheduled for delivery during 1996 (see Table 2.9). In the downtown
redevelopment area, the 198-unit Villa Torina will have 42% "affordable" units.
BAC's $30.4 million, 300-unit Rosewalk at Waterford Park project in San Jose
will be completed in June of 1996. Also scheduled for delivery in 1996 is a
150-unit project developed by the Plymouth Group at the Old Mill site in
Mountain View.
The pipeline of new construction for 1997 includes more than 2,000 units. The
largest of these projects is BAC's The Mark in Sunnyvale. Construction on Forest
City's Renaissance Village, with 633 units, will begin in late 1996, and we
anticipate partial completion in 1997, with the remainder of the units completed
in 1998. Three projects will be completed in Cupertino during 1997, including a
140-unit apartment project at Citation Homes' Corsica of Cupertino, DeAnza
Properties' 196-unit Forge Homestead project, and Pegasus Development's 120-unit
Cupertino Park Center. Three other projects are slated for completion in San
Jose during 1997, as well as a 252-unit project in Santa Clara. Because of the
large number of new units coming on line in 1997 in conjunction with slightly
slower forecasted job growth, we expect the apartment vacancy rate to increase
to 2.8%.
- --------------------------------------------------------------------------------
FIGURE 2.2
- --------------------------------------------------------------------------------
New Households to Multifamily Permits
Santa Clara County
------------------------------------------
[GRAPHIC OMITTED]
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG
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TABLE 2.9
SANTA CLARA APARTMENT UNIT PIPELINE
Delivery Units Project Name City Developer/Owner Status/Comments
- ------------------------------------------------------------------------------------------------------------------
1996 150 Old Mill Site Mtn. View Plymouth Group
1996 198 Villa Torino San Jose Sobrato Development 42% affordable; 58% high-end
1996 300 Rosewalk-Wtrfrd Park San Jose Bay Apt. Commun. In San Jose off Capital Expressway
1997 140 Corsica of Cupertino Cupertino Citation Homes Saratoga-Sunnyvale Rd., old Mariani site
1997 196 Forge Homestead Cupertino DeAnza Properties
1997 120 Cupertino Park Ctr. II Cupertino Pegasus Develop. Construction beginning 7/96
1997 200 Blossom Hill Site San Jose Security Capital
1997 145 Eden Palms San Jose Eden Housing Low-Income housing/affordable
1997 100 Willow Lake-Nrthprk San Jose Sobrato Development Addition, beginning construction 9/96
1997 252 Nantucket (formerly Santa Clara Interland Started early 1996 and due to completed 1/97
Bellavista Phase III)
1997 709 The Mark Sunnyvale Bay Apt. Commun. At 101 and Lawrence Expressway
1997/98 633 Renaissance Village San Jose Forest City 10%-20% tax-exempt; started in fall of 9/96
1998 310 NA Bay Apt. Commun. Lawrence Expressway & Stevens Creek Blvd
1998 300 Tandem Site Cupertino Thompson Residen. Land selling for $45,000/unit suggesting
eventual unit price of $150,000/unit
1998 374 McCarthy Ranch Milpitas Fairfield At 237 and McCarthy Blvd.
1998 120 Park Place Phase II Mtn. View Pegasus Develop. On hold
1998 250 Almaden Lake Village San Jose Alm. Lk. Vill. Assoc. 80% market/20% affordable; begin constr. 9/96
1998 250 NA San Jose Bay Apt. Commun. Folstaff Site near downtown San Jose
1998 276 Bellavista/Nantucket Santa Clara Interland Phase IV starting summer of 1997
1999 600 NA Palo Alto Stanford University Campus housing for university employees
2000 2,000 Moitozo Farm San Jose Pegasus Develop. Owns 80 acres at River Oaks Pkwy & N. First
Sources: Data gathered June of 1996 by RCG from RealData, RealFacts, Local Developers, Local Planning Departments.
A number of projects totaling almost 2,200 units are in the pipeline for 1998.
The largest of these is a 374-unit project at McCarthy Ranch. Also slated for
delivery in 1998 is a 250-unit project in San Jose called Almaden Lake Village,
which will have 20% affordable units. Another unnamed phase of Interland's
Bellavista/Nantucket project in Santa Clara with 276-units is also in the
construction pipeline for 1998. In addition, Thompson Residential is developing
a 300-unit project on the Tandem site, which will be completed in 1998 at the
earliest. Bay Apartment Communities has two projects slated for delivery in
1998, and the second phase of Pegasus Development's Park Place II in Mountain
View, which is currently on hold, may be completed by then. Beyond 1998,
Stanford University has proposed a 600-unit development for university
employees, and Pegasus Development plans to build apartments at the Moitozo Farm
site in San Jose, whose general plan supports some form of housing on the site.
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The outlook for Santa Clara County's apartment market is very strong for the
next several years. The apartment vacancy rate is forecasted to rise from its
current unnaturally low level to 4.1% in 1998 if all the projects in the
construction pipeline are built (see Table 2.10). Rent growth will remain
moderately strong during the next few years. The main factor constraining rent
growth will be the large pipeline of rental construction projects whose
deliveries will begin to offset the growth in demand. While we do not expect the
rent spike of 1995 to repeat in 1996, rent growth will be very healthy at an
estimated 6.8%. By 1997 and 1998, the large amount of new construction entering
the market will increase competition among landlords and will cause rent growth
to slow to the 5% range. However, the possibility is strong that some of the
proposed projects reflected in our forecasts may be postponed or scrapped, which
would cause vacancy to remain very low and rent growth to be higher than
projected.
TABLE 2.10
SANTA CLARA COUNTY APARTMENT MARKET FORECAST (100+ UNITS)
1995 1996f 1997f 1998f 1999f 2000f
Total Stock 51,606 52,254 54,433 56,630 57,230 57.730
New Construction 672 648 2,179 2,197 600 500
Net Absorption 1,763 875 1,525 1,450 800 800
Occupied Stock 50,486 51,361 52,886 54,336 55,136 55,836
Vacancy Rate 2.2% 1.7% 2.8% 4.1% 3.7% 3.1%
Average Rent $971 $1,037 $1,096 $1,144 $1,200 $1,264
Average Rent Change 9.6% 6.8% 5.7% 4.4% 4.8% 5.4%
Sources: 1995 statistics-RealData; Forecasted construction-Local developers &
Planning Departments; Forecasted net absorption, vacancy & rent growth-RCG.
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- --------------------------------------------------------------------------------
Alameda County
- --------------------------------------------------------------------------------
RECENT ECONOMIC TRENDS
Nonagricultural payroll employment in the Oakland metropolitan area, which is
comprised of Alameda and Contra Costa Counties, gained 1.4% in the year ended in
April of 1996 (see Table 3.1a). While slightly slower than the rate of growth
experienced during most of 1995, when the Oakland economy grew at an average
rate of 2.1% for the year, this increase indicates that the economy is
recovering from the defense industry cuts and consolidation in the high
technology sector that plagued the region in the early 1990s. The Alameda County
employment base grew at a 1.5% rate during 1995, slightly surpassing the growth
of the overall metropolitan area (see Table 3.1b). Alameda County's unemployment
rate has fallen to its pre-recession levels, registering a low 4.8% as of April
of 1996.
The services sector is the largest and most quickly growing component of the
Oakland economy, with an employment increase of 4.5% between April of 1995 and
1996. Business services comprises just over one-fourth of services sector
employment. Growth in business services, which includes software development and
temporary services, was 9% in 1995, representing the addition of approximately
5,400 jobs. Between April of 1995 and 1996, growth in business services
employment continued at a strong rate of 7.5%. An example of current expansion
in the software industry is People Soft's purchase in 1995 of three buildings,
totaling 225,000 square feet in Hacienda Business Park in Pleasanton. People
Soft currently employs approximately 200 people in 180,000 square feet in
Pleasanton, but between consolidating its Walnut Creek offices and anticipated
further expansion, the company expects its future requirements to double the
space it recently acquired. Another software expansion involves the joint
venture between Tokyo-based Softbank and Sega of America, which will distribute
video games and personal computer software. The joint venture will be located in
Hayward at a site currently used by Sega. Also in the business services sector,
Robert Half, an employment agency, has leased part of a 71,000 square-foot
building under construction at Hacienda Business Park. The company has also
pre-leased a portion of another building to be built at Hacienda.
Health services also represents almost one-fourth of service sector employment.
Kaiser Permanente is the East Bay's largest employer with more than 12,000
employees as of year-end 1995. Many of Kaiser's jobs are unionized and
relatively well-paying. Also among the largest employers is Alta Bates Health
System, with approximately 2,700 employees. Kaiser recently scrapped plans to
build a new hospital on a 30-acre site in Emeryville and is considering
outsourcing care to other hospitals in a cost-cutting move. These moves indicate
that Kaiser will likely remain a stable source of employment in Oakland, neither
growing rapidly or seriously contracting. Health services employment will be
slower over the next year due to the relocation of U.S. Behavioral Health, a
fast-growing managed health care firm, from Oakland to San Francisco. The move
will mean a loss of 500 current jobs from Oakland and 1,500 future jobs.
The Los Angeles Raiders moved back to Oakland for the 1995 NFL football season.
As part of the agreement with the Raiders, the Oakland Coliseum is undergoing an
$85 million renovation. The return of the Raiders is expected to have a
multiplier effect on local trade and services sector employment. Plans are also
underway to expand the Oakland Coliseum. As a result of the coliseum expansion,
the Golden State Warriors will play in San Jose during the 1996-1997 basketball
season, which could hurt nearby stores and restaurants.
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TABLE 3.1a
OAKLAND MSA EMPLOYMENT DETAIL
1989 1990 1991 1992 1993 1994 1995 Apr-96 1996f
---- ---- ---- ---- ---- ---- ---- ------ -----
Total Nonagricultural 857.2 879.2 879.7 870.2 873.4 877.4 895.6 904.5 916.2
% Change 2.6% 2.6% 0.1% -1.1% 0.4% 0.5% 2.1% 1.4% 2.3%
Construction 45.5 44.6 42.6 40.7 40.8 40.7 42.9 42.8 45.0
% Change 1.6% -2.0% -4.5% -4.5% 0.2% -0.2% 5.4% 3.4% 4.8%
Manufacturing 110.8 111.0 109.7 109.1 102.7 102.3 106.3 107.7 107.6
% Change 2.4% 0.2% -1.2% -0.5% -5.9% -0.4% 3.9% 1.1% 1.2%
Computer Office 4.7 5.3 5.0 6.1 4.4 3.4 3.9 4.4
% Change 23.7% 12.8% -5.7% 22.0% -27.9% -22.7% 14.7% 15.8%
Petroleum & Coal 9.1 9.3 9.3 9.9 8.1 7.9 7.5 6.9
% Change 1.1% 2.2% 0.0% 6.5% -18.2% -2.5% -5.1% -13.7%
T.C.P.U. 57.2 58.2 57.8 54.8 56.8 57.3 58.9 58.6 60.4
% Change 2.7% 1.7% -0.7% -5.2% 3.6% 0.9% 2.8% 1.0% 2.6%
Trucking & Whse 15.1 15.1 14.8 14.0 15.2 16.0 16.2 16.3
% Change 6.3% 0.0% -2.0% -5.4% 8.6% 5.3% 1.2% 2.5%
Water Transport 4.0 3.9 3.5 2.5 2.4 2.3 2.4 2.2
% Change 2.6% -2.5% -10.3% -28.6% -4.0% -4.2% 4.3% -8.3%
Communications 20.9 20.6 20.3 18.9 19.1 18.5 18.5 18.2
% Change -5.9% -1.4% -1.5% -6.9% 1.1% -3.1% 0.0% -0.5%
Trade 212.3 217.5 214.2 204.6 203.9 203.5 205.4 205.0 209.9
% Change 1.4% 2.4% -1.5% -4.5% -0.3% -0.2% 0.9% 1.3% 2.2%
Wholesale Trade 51.2 52.4 54.5 52.6 51.1 51.7 53.7 54.8
% Change 4.9% 2.3% 4.0% -3.5% -2.9% 1.2% 3.9% 3.2%
Retail Trade 161.1 165.1 159.6 152.0 152.8 151.8 151.7 150.2
% Change 0.3% 2.5% -3.3% -4.8% 0.5% -0.7% -0.1% 0.7%
F.I.R.E. 54.1 55.7 54.7 57.8 58.7 56.5 53.4 52.6 52.0
% Change 0.7% 3.0% -1.8% 5.7% 1.6% -3.7% -5.5% -2.2% -2.7%
Services 209.0 221.1 229.1 230.0 237.8 244.4 256.5 265.8 270.3
% Change 4.7% 5.8% 3.6% 0.4% 3.4% 2.8% 5.0% 4.5% 5.4%
Business 50.3 54.2 54.3 52.9 56.2 59.7 65.1 67.5
% Change 10.3% 7.8% 0.2% -2.6% 6.2% 6.2% 9.0% 7.5%
Health 55.0 57.7 60.4 61.4 62.2 62.4 64.1 64.5
% Change 0.2% 4.9% 4.7% 1.7% 1.3% 0.3% 2.7% 1.3%
Engin & Mgm't 22.9 25.0 27.0 27.1 28.6 29.4 31.3 31.3
% Change 11.2% 9.2% 8.0% 0.4% 5.5% 2.8% 6.5% 0.0%
Total Government 164.6 168.0 168.7 169.8 169.6 169.9 170.0 169.6 167.9
% Change 2.4% 2.1% 0.4% 0.7% -0.1% 0.2% 0.1% -2.1% -1.2%
Total Federal 30.8 31.0 30.3 30.2 29.0 28.1 26.8 24.2
% Change 1.7% 0.6% -2.3% -0.3% -4.0% -3.1% -4.6% -12.6%
U.S. Dept of Def 12.1 12.1 11.9 12.3 11.8 10.2 8.3 6.0
% Change 0.8% 0.0% -1.7% 3.4% -4.1% -13.6% -18.6% -32.6%
State Education 23.0 23.3 23.0 22.9 22.9 23.4 23.8 24.5
% Change 1.8% 1.3% -1.3% -0.4% 0.0% 2.2% 1.7% -0.4%
Sources: Historical data-Bureau of Labor Statistics; Calculations and forecasts-RCG.
Rosen Consulting Group 30
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TABLE 3.1b
ALAMEDA COUNTY EMPLOYMENT
1990 1991 1992 1993 1994 1995 Apr-96
---- ---- ---- ---- ---- ---- ------
Total Employment 649,038 631,494 626,212 627,297 637,247 647,060 --
% Change 1.9% -2.7% -0.8% 0.2% 1.6% 1.5% --
Unemployment Rate 4.0% 6.3% 6.5% 6.6% 6.1% 5.8% 4.8%
Sources: Bureau of Economic Analysis, California Employment Development
Department, RCG.
The manufacturing sector is another growing component of the Oakland economy,
posting an employment gain of 1.1% in the year ending in April of 1996. The gain
of 1.1% disguises dramatic growth in the high technology industry in Alameda
County which has been largely offset by large losses in Oakland's traditional
manufacturing industries, particularly petroleum and coal products, which is
concentrated in northern Contra Costa County, where Chevron, Shell, and Tosco
refineries are all located. (Chevron also has a significant presence in San
Ramon). Employment in the petroleum and coal products subsector has dropped by
almost a third since 1992 to 6,900, eliminating many high-paying jobs. Since
1992, Chevron has downsized significantly at its refinery and at its San Ramon
facility. In addition, Pacific Refinery, an independent operation in Hercules,
shut down, eliminating 750 to 1,000 jobs, and Unocal is downsizing at its
refinery in Contra Costa County.
The presence of the University of California at Berkeley, a major research
university, has helped to attract technology-related companies, ranging from
software development to biotechnology. The engineering and manufacturing jobs at
these companies generally pay well. Nearby Emeryville is the location of much of
the recent expansion in these industries. In Emeryville, Sybase is planning two
new buildings, totaling approximately 550,000 square feet, to house software
engineers. Construction will begin on the first building in 1996 and on the
second building in 1997. Also in Emeryville, Chiron Corporation has announced
plans to build an $800 million new corporate headquarters. The project is
expected to house approximately 1,000 workers when completed after the turn of
the century. Chiron expects to break ground in early 1997 on its first
laboratory building, which will be followed by a second lab building in 1998 or
1999. The last phase of the project will be an office tower, which will not be
under construction until at least the year 2000. Further, Chiron announced plans
to put up $250,000 in funds for an Oakland-based biotechnology center aimed at
helping start-up companies find laboratory space.
Perhaps the most dynamic pocket of economic activity in Alameda County is the
southern portion of the county bordering Santa Clara County. The high technology
boom which is centered in Santa Clara County has spilled over into southern
Alameda County as companies look for room to expand. Growth in the computer and
office equipment manufacturing subsector, a highly concentrated part of the
Oakland and, specifically, Alameda County economy, was 14.7% during 1995 and
15.8% as of April of 1996 in Oakland, following significant employment decreases
in 1993 and 1994. A number of companies have selected southern Alameda County
for new facilities. For example, Tandem Computers subleased 495,000 square feet
of space from Xerox in Fremont in February of 1995, and Compaq, the computer
maker, chose Fremont for a distribution facility. Fremont-based LAM Research, a
manufacturer of semiconductor equipment, added 1,500 new employees in 1995. The
company is building a new facility, which is scheduled for occupancy in August
of 1996, and it is searching the Bay Area for a place to build
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a new plant. Also in Fremont, Altratron leased 84,000 square feet of R&D space.
In Hayward, South San Francisco-based Heat & Control is building a new $9.5
million, 144,000 square-foot headquarters, scheduled for completion in late 1996
or early 1997. The company, which employs 300, will increase its staff by 10% at
the new facility.
Manufacturing sector expansion has also occurred to the east, both in high
technology and more traditional manufacturing industries. Seaway Semiconductor
is purchasing the former Intel factory in Livermore as part of a major expansion
that could create 150 jobs during 1996. In Pleasanton, a hot spot for all types
of job growth in Alameda County, Unisource, a paper distributor, completed a
375,000 square-foot facility at Hacienda Business Park. The company employs 300
at the facility which was completed in 1995. The Cooper Companies, a developer
and manufacturer of contact lenses and other health care products, is moving its
headquarters from New Jersey to Pleasanton. The company employs 960 people with
sales of $100 million. Boehringer Manheim, a company which makes test kits for
the government and other agencies, is negotiating on a large complex at Hacienda
which would include offices, manufacturing, and warehouse space.
Traditional manufacturing industries, such as automobile manufacturing and food
processing, also play an important role in Oakland's manufacturing sector. The
New United Motors Manufacturing plant (Toyota/General Motors joint venture) is
one of Alameda County's largest employers, with approximately 4,500 employees.
Pepsi-Cola will begin operating a new manufacturing and distribution plant in
Hayward in mid-1996. The company will consolidate operations from four other
smaller Bay Area installations and will employ approximately 475 people at the
new facility. Some traditional manufacturers are cutting employment. Los
Angeles-based Mission Foods will close its Richmond tortilla factory in the
spring of 1996, eliminating 165 jobs. In addition, Del Monte Foods announced
plans to lay off 150 administrative and research employees, some of whom are
located in its Walnut Creek research and development facility.
Some manufacturers are attracted to Oakland because of the accessibility of the
Port of Oakland, which is the largest Bay Area port facility. The Port of
Oakland is the fifth largest in the country in terms of international
containerized trade. Import/export activity through the port increased 4.6%
during 1995. The Port of Oakland is being expanded through the acquisition of
the Naval Supply Center property. Expansion plans include dredging the main
channel to 42 feet, building an intermodal rail terminal serving two rail roads,
including the combined Union Pacific and Southern Pacific roads, and upgrading
existing facilities. Approximately 134 acres of the former Naval Supply Center
has been transferred to the Port of Oakland and has been leased out to thirty
companies employing 500 people. Most of the businesses on the site support the
steamship industry at the Port. An additional 400 acres of Navy land will be
transferred in parcels by September of 1998.
Growth at the Port contributed to an employment gain of 1.0% in the
transportation, communications, and public utilities (TCPU) sector between April
of 1995 and 1996. Also contributing to the increase is the trucking and
warehousing industry, whose growth has been fed by the expanding manufacturing
sector. At Oakland International Airport, passenger volume increased almost 18%
during 1995 because of expansions at Southwest Airlines, Shuttle by United, and
Alaska Airlines. Cargo volume at the airport increased 12% during 1995. Federal
Express opened a clearance center at Oakland during 1995, hiring an additional
100 employees, and the airport authority is undertaking a major airport
expansion.
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Bay Area international trade was up 27.7% last year, more than double the growth
rate of the nation's other ports. The region ranked fourth-largest, behind New
York, Los Angeles and Detroit. However, the Bay Area will likely overtake
Detroit within the year for third spot honors. The trade boom is linked to the
region's explosive computer electronics industry. The top five trading partners
of the Bay Area are the Asian nations of Japan, Korea, Singapore, Taiwan and
Malaysia. The Bay Area shipping trade is conducted through the ports of Oakland
and Alameda.
Increased manufacturing and port activity have driven growth in the wholesale
trade sector. During 1995, wholesale trade employment, which represents
one-fourth of the trade sector, increased 3.9%. Retail trade did not fare as
well, with employment remaining fairly stable for 1995, although employment data
as of April of 1996 reveals small job gains in this sector. A number of retail
projects are underway, which should cause retail trade to gain during the next
several years. In Emeryville, one of Oakland's most active retail submarkets,
plans are underway for the second phase of East Bay Bridge Center, the first
phase of which was completed in late 1994. In addition, an entertainment-based
"Retail Village" is pre-leasing and expected to be under construction within a
year in Emeryville. In downtown Oakland, Sears has purchased the landmark
Emporium department store which closed in early 1996. Sears will open a store at
the site in the fall of 1996. At Jack London Square near downtown Oakland, the
retail space is nearly fully occupied, and plans are underway for a second
development phase.
Away from downtown, Safeway is moving its corporate headquarters from Oakland to
Pleasanton. Safeway is consolidating 1,110 employees currently working at three
facilities in Oakland, Fremont and Walnut Creek to existing buildings at
Centrepoint Office Park in Pleasanton. Safeway expects to complete the move by
early July of 1996. Safeway chose Pleasanton because many of its employees live
nearby and because BART is scheduled to open a Pleasanton station during 1996.
Safeway's move will boost Pleasanton's employment base, although it will not
notably impact the overall metropolitan area.
A number of other retail projects are underway which will create new jobs in the
retail trade sector. These projects range from Chicago-based Homart Community
Centers' planned 800,000 square-foot shopping center, Tri-Valley Crossings in
Dublin, to smaller shopping centers of approximately 135,000 square feet each
which are underway in San Ramon and Livermore.
Employment in the highly concentrated government sector declined during the year
ended in April of 1996, largely because of declining federal government
employment which sustained a loss of 12.6% for the year ending in April of 1996.
The decrease in the federal government employment has been fueled by military
base closures, and it occurred in spite of increased employment resulting from
the completion of the new twin Federal Towers in downtown Oakland during 1994.
U.S. Department of Defense employment was responsible for more than the total
amount of federal government shrinkage, with employment declining by a third
during the last year alone, representing the loss of nearly 2,000 jobs. As a
result of the actions of the Base Realignment and Closure (BRAC) Commission, the
Alameda Naval Air Station, the Naval Aviation Depot, the Defense Depot, the
Naval Hospital, the Naval Supply Center, and the Oakland Army Base will be
closed by the turn of the century.
Reuse of the military facilities will ease the impact of the base closures. As
one of the first steps in converting the Naval Air Station to civilian uses,
Burbank-based Calstart leased the 65,000 square-foot Hanger 20 at the Alameda
Naval Air Station for use as an electric-car production facility that could
create 100 jobs by the end of 1996. In addition, as previously mentioned, 134
acres of the Naval Supply Center
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in Oakland has been transferred to the Port of Oakland, with an additional 400
acres to follow by late 1998. Although reuse will help the transition, the
closure of military bases will create downward pressure on Oakland's employment
growth during the next several years.
Other major federal government employers are the Lawrence Livermore National
Laboratory and the Lawrence Berkeley National Laboratory, which together employ
almost 11,000 people. Employees at these facilities, as well as the state
operated University of California at Berkeley, are generally highly educated,
highly skilled researchers and professors who drive much of the scientific and
entrepreneurial growth in the region. Overall employment at these facilities has
declined by approximately 1,100 during the past two years. This decline is also
reflected in government sector employment statistics.
FORECASTED EMPLOYMENT TRENDS
The Oakland metropolitan economy is in the midst of its recovery. Employment is
expected to increase at an average rate of 2.7% per year between 1995 and 2000
(see Table 3.2). Much of the growth will be in the southern portion of Alameda
County (Fremont and nearby cities) and in the Tri-Valley area (Livermore, Dublin
and Pleasanton). The services sector will lead the growth because of increased
demand for temporary workers and expected strong growth in the software
industry. Growth in the manufacturing sector will slow from 1995's level as the
semiconductor industry slows, but it will stay positive as expanding companies
continue to find that the East Bay offers more room to expand and more
reasonable prices than other Bay Area locations. Economic growth will be
dampened by a weak government sector affected by military base closures.
However, the completion of a $97 million state office complex in downtown
Oakland in April of 1998 will mitigate the government sector losses. Over the
long term, reuse of the closed military bases will create a unique opportunity
to establish new business.
TABLE 3.2
OAKLAND MSA EMPLOYMENT FORECAST
1992 1993 1994 1995 1996f 1997f 1998f 1999f 2000f
Total Nonagricultural 870.2 873.4 877.4 895.6 916.2 939.1 967.3 994.9 1023.1
% Change -1.1% 0.4% 0.5% 2.1% 2.3% 2.5% 3.0% 2.9% 2.8%
Construction 40.7 40.8 40.7 42.9 45.0 44.1 44.6 45.2 46.2
% Change -4.5% 0.2% -0.2% 5.4% 4.8% -1.8% 1.0% 1.5% 2.2%
Manufacturing 109.1 102.7 102.3 106.3 107.6 107.9 109.2 110.7 112.3
% Change -0.5% -5.9% -0.4% 3.9% 1.2% 0.3% 1.2% 1.3% 1.5%
T.C.P.U. 54.8 56.8 57.3 58.9 60.4 61.4 62.5 63.8 65.1
% Change -5.2% 3.6% 0.9% 2.8% 2.6% 1.7% 1.8% 2.0% 2.1%
Trade 204.6 203.9 203.5 205.4 209.9 215.0 221.7 227.0 231.7
% Change -4.5% -0.3% -0.2% 0.9% 2.2% 2.4% 3.1% 2.4% 2.1%
F.I.R.E. 57.8 58.7 56.5 53.4 52.0 53.3 55.1 56.6 57.8
% Change 5.7% 1.6% -3.7% -5.5% -2.7% 2.6% 3.3% 2.7% 2.1%
Services 230.0 237.8 244.4 256.5 270.3 282.9 296.9 311.7 327.6
% Change 0.4% 3.4% 2.8% 5.0% 5.4% 4.6% 4.9% 5.0% 5.1%
Total Government 169.8 169.6 169.9 170.0 167.9 171.1 174.1 176.8 179.1
% Change 0.7% -0.1% 0.2% 0.1% -1.2% 1.9% 1.8% 1.5% 1.3%
Total Alameda City 626.2 627.3 637.2 647.1 658.4 671.1 687.1 702.1 718.4
% Change -0.8% 0.2% 1.6% 1.5% 1.7% 1.9% 2.4% 2.3% 2.2%
Sources: Historical data-Bureau of Labor Statistics;
Calculations and forecasts-RCG.
Rosen Consulting Group 34
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DEMOGRAPHIC TRENDS
As Alameda County's economy slowly recovers from the dual forces of recession
and military downsizing, population growth is currently rebounding. For the five
years from 1990 to 1995, however, population growth averaged 1.1% per year, a
drop from the average annual growth of 1.5% from 1980 to 1990 (see Table 3.3).
During the next five years, we expect population growth will continue to
accelerate, reflecting the higher rates of job creation. Population growth will
be highest in the oldest groups, as the baby boom begins to move into the 55 to
64 year old age group and moves completely out of the 25 to 34 year old age
group. Due to the echo baby boom, which includes the children of the baby
boomers, population growth in the youngest age group will also be strong.
Overall, we expect that population growth will average 1.2% per year during the
last half of the 1990s, resulting in absolute annual population growth which is
comparable to that of the 1980s, if not slightly higher.
TABLE 3.3
ALAMEDA COUNTY POPULATION BY AGE
Compound Annual Growth Rate
Age Group 1980 1990 1995 2000 1980-1990 1990-1995 1995-2000
- --------- ---- ---- ---- ---- -----------------------------------
19 & Under 318,597 338,267 360,800 389,700 0.6% 1.3% 1.6%
20-24 110,499 106,064 97,200 100,500 -0.4% -1.7% 0.7%
25-34 213,069 251,290 239,700 228,300 1.7% -0.9% -1.0%
35-44 136,139 219,401 231,400 232,100 4.9% 1.1% 0.1%
45-54 109,272 131,504 159,900 182,600 1.9% 4.0% 2.7%
55-64 103,597 94,394 111,600 135,300 -0.9% 3.4% 3.9%
65+ 114,206 135,782 149,000 161,500 1.7% 1.9% 1.6%
Total 1,105,379 1,276,702 1,349,600 1,430,000 1.5% 1.1% 1.2%
Sources: Historical data - U.S. Census Bureau; Calculations and forecasts-RCG.
The effect of improving economic conditions on net migration can clearly be seen
from the Department of Motor Vehicles Drivers License data for the fiscal years
1989-1990 to 1994-1995 (see Table 3.4). Economic growth slowed in California
during 1989 and was reflected in weak job growth in Oakland in 1991. The data
for net drivers entering Alameda County began to plummet in the 1989-1990 fiscal
year (July 1 to June 30) and it continued negative through 1993-1994. For the
fiscal year ended on June 30, 1995, the net flow of drivers to Alameda County
had once again turned positive, and we estimate that the inflow has expanded
during the current fiscal year (1995-1996).
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TABLE 3.4
ALAMEDA COUNTY DRIVERS LICENSE MIGRATION DATA
Estimated Net
Net Drivers Population
Fiscal Year Drivers To: Drivers From: In (Out) In (Out)
- ----------- ----------- ------------- ----------- -------------
89-90 67,692 68,520 (558) (837)
90-91 68,203 68,943 (740) (1,110)
91-92 65,468 67,865 (2,397) (3,596)
92-93 57,424 62,303 (4,879) (7,319)
93-94 65,485 68,681 (3,196) (4,794)
94-95 67,083 63,078 4,005 6,008
Sources: Historical Data-California Department of Motor Vehicles Driver License
Address Change Report-August 1990-1995; Calculations-RCG.
Household formation in Alameda County has reflected a similar pattern to overall
population growth during the past fifteen years. During the 1980s, the number of
households in Alameda County grew at an average rate of 1.2% per year. From 1990
to 1995, the average rate of household growth slowed to 0.6% per year. In the
1995 to 2000 period, we anticipate that the rate of household formation will
rebound, but not to the rate of the 1980s. In the next five years, we expect
that household growth in Alameda County will average 1% per year, representing
the creation of approximately 5,200 households per year (see Table 3.5).
Similar to population growth, household formation will be strongest in the
younger and older age groups. The age distribution reveals a decline in the
population in the so-called baby-dearth generation. The nadir in birth rates in
California occurred in the 1974 to 1975 period, which means that in 1995 those
people would be entering the 20 to 24 year-old age group, which is typically the
age at which people form new households, fuelling household growth. In the 1995
to 2000 period, the falling birthrates of two decades ago imply reduced numbers
in both the 25 to 34 year-old age group and the 35 to 44 year-old age group.
Trailing the baby-dearth generation is the baby-boom echo, which can clearly be
seen in the growth of
TABLE 3.5
ALAMEDA COUNTY HOUSEHOLDS BY AGE
Comp Ann Growth Rate
----------------------
Age Groups 1990 1995 2000 1990-1995 1995-2000
- ---------- ------- ------- ------- --------- ---------
15-24 24,935 24,553 24,712 -0.3% 0.1%
25-34 113,646 110,310 109,511 -0.6% -0.1%
35-44 119,880 118,759 119,985 -0.2% 0.2%
45-54 79,120 86,624 96,745 1.8% 2.2%
55-64 55,624 62,477 71,432 2.4% 2.7%
65+ 86,313 90,606 97,012 1.0% 1.4%
Total 479,518 493,329 519,397 0.6% 1.0%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
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the 0 to 19 year-old age group in the 1995 to 2000 period. The number of
households in the 45 to 54 year-old age category will grow rapidly during the
decade of the 1990s as those born during the post-World War II baby-boom enter
that age group. These population trends have significance for household
formation and tenure choice and the demand for rental units.
AFFORDABILITY, TENURE CHOICE, AND THE DEMAND FOR RENTAL UNITS
Alameda County is one of the most affordable of the nine counties which form the
San Francisco Bay Area. The median price of an existing single family home was
$182,738 as of year-end 1995 compared to $112,900 for the nation as a whole.
Housing affordability, which is measured by the proportion of households able to
afford the median-priced house under standard conventional mortgage terms,
increased fairly steadily between 1990 and 1994 for both the U.S. and Alameda
County, driven primarily by lower mortgage rates. By that measure, affordability
rose more in Alameda County than in the United States because the ratio of
household income to median home price rose more in relative terms in Alameda
County than it did in the United States. Nevertheless, even though affordability
rose more in Alameda County than in the United States in the 1990 to 1994
period, affordability was still much lower in Alameda than in the nation. As of
year-end 1995, 47.4% of households could afford the median-priced home in
Alameda County compared with 54.8% nationwide.
The lower level of housing affordability in Alameda County has resulted in a
higher proportion of renters in Alameda County than in the nation, similar to
most of the San Francisco Bay Area. Nearly 47% of households in Alameda County
are renters compared with 35.8% nationwide. The proportion of households
choosing to rent was very steady during the 1980 to 1990 period and, despite the
change in
TABLE 3.6
AFFORDABILITY DATA
ALAMEDA COUNTY AND THE UNITED STATES
1990 1991 1992 1993 1994 1995 1996e
-------- -------- ------- --------- --------- ------- --------
Median Existing
Home Price
Alameda County $180,000 $185,000 $181,000 $183,500 $183,600 $182,738 $186,027
% Change 0.0% 2.8% -2.2% 1.4% 0.1% -0.5% 1.8%
United States $95,500 $100,300 $103,700 $106,800 $109,800 $112,900 $117,500
% Change 2.6% 5.0% 3.4% 3.0% 2.8% 2.8% 4.1%
Household Income
Alameda County $62,400 $63,100 $66,900 $68,700 $72,000 $74,400 $77,300
% Change 7.2% 1.1% 6.0% 2.7% 4.8% 3.3% 3.9%
United States $37,403 $37,922 $39,020 $41,428 $43,845 $45,999
% Change 2.4% 1.4% 2.9% 6.2% 5.8% 4.9%
Mortgage Int. Rate 10.1% 9.2% 8.4% 7.3% 8.4% 8.0% 7.5%
Households Able to
Afford Median-
Priced Home
- --------------------------------------------
Alameda County 31.2% 33.4% 40.7% 46.0% 43.9% 47.4% 50.3%
United Staes 50.0% 51.0% 55.0% 58.0% 57.0% 54.8%
Sources: Historical data-National Association of Realtors, Federal Reserve
Board of Governors, U.S. Bureau of the Census; Calculations and 1996
estimate-RCG.
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housing affordability, we suspect that it will remain fairly steady over the
1990s, when viewed by age group. That is, a similar percentage of households in
each age group will chose to rent as did during the 1980s, but, due to the
higher volume of households being created in both younger and older age groups,
the marginal rate of tenure selection will be different. Specifically, a lower
percentage of the new households being formed will choose to rent, as a result
of their age and the effect that age typically has on decisions to rent versus
own.
In order to calculate the underlying demographic demand for rental units in
Alameda County during the next five years, we combined our projections of
household growth by age group with the age-specific renter proportion data
observed during the 1980 and 1990 censuses. This calculation provides the
age-specific demographic demand for rental units. In Alameda County through the
year 2000, we anticipate that demographic demand will exist for more than 7,700
rental units, or about 30% of the new households. This represents total rental
demand of nearly 780 units per year during the 1995 to 2000 time period.
TABLE 3.7
PROJECTION OF APARTMENT DEMAND BY AGE
ALAMEDA COUNTY
Change in
1990 1995 2000 Households Renter New
Age Groups Households Households Households 1995-2000 Proportion Rental Units
15-24 24,935 24,553 24,712 159 92.1% 146
25-34 113,646 110,310 109,511 (799) 68.5% (547)
35-44 119,880 118,759 119,985 1,226 45.7% 560
45-54 79,120 86,624 96,745 10,121 32.8% 3,320
55-64 55,624 62,477 71,432 8,955 28.2% 2,525
65+ 86,313 90,606 97,012 6,406 31.8% 2,037
Total 479,518 493,329 519,397 26,068 29.9% 7,794
Sources: Historical data - U.S. Census Bureau; Calculations and forecasts-RCG.
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APARTMENT MARKET TRENDS
Alameda County's apartment market tightened during 1995. Despite the addition of
more than 400 new units in the La Vina project in Livermore and the Red Hawk
Ranch project in Fremont during 1995, the vacancy rate for projects with more
than 100 units dropped to 3.4% during the year, representing the absorption of
more than 600 units (see Table 3.8). The hottest portion of Alameda County's
rental market is in the southern portion of the county, where Silicon Valley
high technology activity is spilling over into Alameda County. The vacancy rate
is lowest in Newark, followed by Emeryville, Union City and Livermore. The
decrease in vacancy during 1995 was accompanied by a 2.1% increase in average
rents. While this increase is not especially large, it is the strongest growth
experienced in the county since 1990.
TABLE 3.8
ALAMEDA COUNTY APARTMENT MARKET TRENDS (100+ UNITS)
1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Stock 25,274 27,914 29,300 29,614 30,093 30,401 30,401 30,401 30,808
New Construction 1,806 2,640 1,386 314 479 308 0 0 407
Net Absorption 1,530 2,441 1,356 574 281 637 (815) 310 633
Occupied Stock 24,334 26,775 28,131 28,705 28,986 29,623 28,808 29,118 29,751
Vacancy Rate 3.7% 4.1% 4.0% 3.1% 3.7% 2.6% 5.2% 4.2% 3.4%
Average Rent $656 $684 $723 $753 $766 $778 $792 $803 $820
Avg Rent Change 2.0% 4.3% 5.7% 4.1% 1.7% 1.6% 1.8% 1.4% 2.1%
Sources: New construction, vacancy, avg. rent, & stock-RealData; Net absorption
& occupied stock calculations-RCG.
Tightening rental market conditions during the past two years have created the
anticipation of stronger rent growth, which in turn has caused developers to
increase activity. During early 1996, Sobrato Development delivered a 211-unit
project called Watermark Place in Fremont (see Table 3.9). Several other large
projects are slated for delivery in Alameda County this year. Kaufman and
Broad's California Highlands will add 234 units to the Dublin market during
1996. While most of the California Highlands units are townhomes for sale, some
will be rented. In 1996 or 1997, A.F. Evans will complete a 146-unit project
called the Promenade in Pleasanton.
The pipeline for 1997 is stronger than 1996, with almost 700 units scheduled for
delivery in projects of over 100 units. The largest of these projects is a
462-unit A.G. Spanos Company community call Park View in Pleasanton. The
proposed project went before the local planning commission for approval in
March, and would be completed in 1997 at the earliest. In addition, the first
phase of developer M.H. Podell's Presidio project, with 228 units, is scheduled
for delivery in Fremont in 1997. A second phase of this project, with 204 units,
should be delivered in 1998, along with the second phase of Podell's Red Hawk
Ranch project, with 180 units. Developer SNK has proposed a 240-unit project for
the Dividend site in Fremont, which would be completed in 1998 at the earliest,
and the Mid-Peninsula Housing Group has proposed a 100-unit low
income/affordable project in Fremont for which no completion date is known.
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TABLE 3.9
ALAMEDA COUNTY APARTMENT UNIT PIPELINE
Delivery Units Project Name City Developer/Owner Status/Comments
- -------- ---- ------------ ---- --------------- ---------------
1996 211 Watermark Place Fremont Sabrato Compl. 1/96; 1 bdrm units ranging $985-$1075
1996 234 California Highlands Dublin K&B Townhomes for sale; but some may be rented
1996/97 146 The Promenade Pleasanton A.F. Evans
1997 462 Park View Pleasanton A.G. Spanos Former Spanish Oaks; planning commiss 3/96
1997 228 Presidio Fremont M.H. Podell Phase I
1998 204 Presidio Fremont M.H. Podell Phase II
1998 180 Red Hawk Ranch-II Fremont M.H. Podell First phase of 303 units completed in 1995
1998 240 Dividend Site Fremont SNK
NA 100 No Name Fremont Mid-Penins, Hsg Grp Low-income/affordable
Sources: Data gathered June of 1996 by RCG from RealData, RealFacts, Local
Developers, Local Planning Departments.
Although the pipeline of new supply in Alameda County has increased, it remains
small in comparison to Santa Clara County. The ratio of new households created
to multifamily permits issued shows that more new households have been created
than multifamily permits have been issued during recent years (see Figure 3.1).
Through 2000, we anticipate that demand for apartments, especially upscale units
offering numerous amenities, will be created by the expanding high technology
sector, although overall demand growth, particularly in low to medium-rent units
will be dampened by military employees leaving the area. Although our forecasts
suggest that the apartment vacancy rate will increase in 1997 and 1998, the
market will remain healthy with vacancy below 5% (see Table 3.10). By 1999,
construction activity will slow notably, and the rental vacancy rate for large
projects will return to the 3% range. Meanwhile, we project rent growth will
increase an average of 4.9% per year between 1995 and 2000.
- --------------------------------------------------------------------------------
Figure 3.1
- --------------------------------------------------------------------------------
New Households to Multifamily Permits
Alameda County
--------------------------------------------
[Copy to be Supplied by Client]
Sources: Historical data-U.S. Census Bureau; Calculations and forcasts-RCG
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TABLE 3.10
ALAMEDA COUNTY APARTMENT MARKET FORECAST (100+ UNITS)
1995 1996f 1997f 1998f 1999f 2000f
------ ------ ------ ------ ------ ------
Total Stock 30,808 31,308 31,998 32,572 32,792 32,892
New Construction 407 500 690 574 220 100
Net Absorption 633 550 500 450 350 250
Occupied Stock 29,751 30,301 30,801 31,251 31,601 31,851
Vacancy Rate 3.4% 3.2% 3.7% 4.1% 3.6% 3.2%
Average Rent $820 $863 $904 $945 $991 $1,043
Average Rent Change 2.1% 5.3% 4.8% 4.4% 4.9% 5.3%
- ------------
Sources: 1995 statistics-Real Data; Forecasted construction-Local developers &
Planning Departments; Forecasted net absorption, vacancy & rent
growth-RCG.
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San Francisco County
RECENT ECONOMIC TRENDS
The San Francisco metropolitan area, which includes the counties of San
Francisco, San Mateo, and Marin, is a financial and legal center, with a large
tourism industry. The high technology and biotechnology industries also play an
important role in the economy, as does San Francisco International Airport and
related activities. Of diminishing importance to the metropolitan area are the
government and military presence. During the year ended in April of 1996,
metropolitan area payroll employment grew 1.5% (see Table 4.1a). At the county
level, data for 1995 (the most recent time period available) suggests that
employment grew 0.5% in San Francisco County in 1995, compared to 1.2% for the
metropolitan area over the same period. Employment in San Francisco County
typically grows more slowly than the nation, even during boom times, because the
area is relatively built-out and expensive. The unemployment rate for San
Francisco County was 4.8% in April of 1996.
The employment recovery is concentrated in the services, trade, and construction
sectors, although the small manufacturing sector had a growth bounce during the
past year. Between April of 1995 and 1996, the construction sector was the
fastest growing, with growth of 6.1%. The strong gains in construction
employment can be partially attributed to work on the airport expansion.
The services sector added the most jobs in absolute terms between April of 1995
and 1996, with almost 7,000 new jobs, representing a growth rate of 2.5%. The
services sector includes consulting, legal, accounting, business and health
services, and pre-packaged software. The large relative size of this sector is
indicative of San Francisco's role as a regional legal and accounting center, as
well as a regional medical center. UCSF, the medical school of the University of
California, has decided, as part of its long range plan, to build its second
campus in San Francisco. The decision to stay in San Francisco will result in
the addition of between 5,000 and 6,000 jobs to the San Francisco economy during
the next several decades. Over the shorter term, the business services sector
has grown during 1995 and into 1996 as many companies out-source functions that
were at one time performed within the corporation. Another growing component of
the services sector, especially in San Mateo County, is the software industry.
The position of San Francisco as a tourist and convention destination is firmly
established. Tourism and convention activity have increased during the past
several years as the national economy has recovered from the recession of the
early 1990s, providing a boost to service sector employment. Hotel occupancy in
the City of San Francisco has increased from 68.5% in July of 1994 to 74.6% in
December of 1995, according to PKF Consulting. Increasing numbers of European
visitors have made San Francisco a stop on their itinerary, taking advantage of
the favorably priced dollar. The new San Francisco Museum of Modern Art opened
in early 1995. Another new attraction which is adding to service sector
employment is Underwater World at Pier 39, an aquarium and science center that
recently opened. In addition, the recent expansion of Moscone convention center
has fueled an increase in convention business.
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TABLE 4.1A
SAN FRANCISCO MSA EMPLOYMENT DETAIL
1989 1990 1991 1992 1993 1994 1995 Apr-96 1996f
------ ------ ------ ------ ------ ------ ------ ------ -----
Total Nonagricultural 933.2 947.3 939.6 914.4 908.3 903.7 914.1 917.7 926.6
% Change 1.1% 1.5% -0.8% -2.7% -0.7% -0.5% 1.2% 1.5% 1.4%
Construction 30.0 31.5 30.4 27.4 26.1 26.6 27.7 27.9 30.0
% Change 2.0% 5.0% -3.5% -9.9% -4.7% 1.9% 4.1% 6.1% 8.3%
Manufacturing 79.0 78.0 78.0 75.2 75.0 73.2 72.3 73.8 74.1
% Change 0.9% -1.3% 0.0% -3.6% -0.3% -2.4% -1.2% 3.4% 2.5%
Electronic Equip 6.9 6.7 7.0 7.2 6.9 7.0 7.5 7.9
% Change 9.5% -2.9% 4.5% 2.9% -4.2% -1.4% 7.1% 6.8%
Apparel Prod 13.7 14.5 15.0 15.0 15.4 15.1 15.1 15.3
% Change 3.0% 5.8% 3.4% 0.0% 2.7% -1.9% 0.0% 0.7%
T.C.P.U. 74.8 76.2 76.8 77.9 76.4 75.1 73.2 72.6 72.8
% Change -0.9% 1.9% 0.8% 1.4% -1.9% -1.7% -2.5% 0.0% -0.5%
Water Transport 3.0 3.1 2.9 3.7 3.4 3.2 3.1 3.0
% Change 0.0% 3.3% -6.5% 27.6% -8.1% -5.9% -3.1% -3.2%
Transport By Air 26.2 28.0 29.3 29.1 28.0 26.2 25.8 25.6
% Change 5.2% 6.9% 4.6% -0.7% -3.8% -6.4% -1.5% -1.2%
Trade 215.6 211.7 205.4 195.4 192.0 194.1 199.6 197.5 201.9
% Change 0.9% -1.8% -3.0% -4.9% -1.7% 1.1% 2.8% 1.0% 1.2%
Wholesale Trade 60.1 57.8 54.9 51.1 47.3 47.4 49.2 49.6
% Change -1.3% -3.8% -5.0% -6.9% -7.4% 0.2% 3.8% 1.4%
Retail Trade 155.5 153.9 150.5 144.3 144.7 146.7 150.4 147.9
% Change 1.8% -1.0% -2.2% -4.1% -0.3% 1.4% 2.5% 0.8%
F.I.R.E. 103.6 104.4 104.8 101.3 100.6 98.8 95.6 94.5 94.7
% Change -1.3% 0.8% 0.4% -3.3% -0.7% -1.8% -3.2% -1.2% -0.9%
Finance 56.5 57.2 56.6 54.1 54.7 54.1 52.4 52.4
% Change -1.9% 1.2% -1.0% -4.4% 1.1% -1.1% -3.1% 0.2%
Services 293.4 305.9 304.8 303.4 308.2 308.1 319.8 323.1 329.1
% Change 2.6% 4.3% -0.4% -0.5% 1.6% -0.0% 3.8% 2.5% 2.9%
Business 72.8 76.2 73.7 73.7 78.0 75.5 79.3 82.3
% Change 4.3% 4.7% -3.3% 0.0% 5.8% -3.2% 5.0% 6.1%
Engin & Mgm't 41.6 44.4 45.0 42.6 42.3 43.1 45.9 44.6
% Change 2.0% 6.7% 1.4% -5.3% -0.7% 1.9% 6.5% -1.3%
Total Government 136.2 139.0 138.8 133.3 129.4 127.1 125.4 127.7 123.5
% Change 1.2% 2.1% -0.1% -4.0% -2.9% -1.8% -1.3% 0.9% -1.5%
Total Federal 36.7 36.0 35.7 33.0 30.9 29.1 26.8 26.5
% Change -0.8% -1.9% -0.8% -7.6% -6.4% -5.8% -7.9% -1.1%
Sources: Historical data-Bureau of Labor Statistics; Calculations and
Forecasts-RCG.
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TABLE 4.1B
SAN FRANCISCO COUNTY EMPLOYMENT
1990 1991 1992 1993 1994 1995 Apr-96
---- ---- ---- ---- ---- ---- ------
Total Employment 628,600 594,666 581,877 575,903 572,109 575,025 --
% Change 0.0% -5.4% -2.2% -1.0% -0.7% 0.5% --
Unemployment Rate 3.8% 5.4% 6.9% 7.0% 6.4% 6.1% 4.8%
Sources: Bureau of Economic Analysis, California Employment Development
Department, RCG.
Health services stands to gain as a result of the relocation of U.S. Behavioral
Health, a fast growing managed health care firm, which is moving to San
Francisco from Oakland in July of 1996. The move will result in a gain of 500
jobs immediately for San Francisco County's economy, in addition to the prospect
of an additional 1,500 jobs over the long term as the company expands.
Trade sector employment increased 1.0% between April of 1995 and 1996. Much of
the trade sector involves retail trade, which has increased as retailers expand
in San Francisco. However, wholesale trade employment has also grown as a result
of increased exports to the so-called Asian Tigers (South Korea, Singapore, Hong
Kong and Taiwan). The expansion of trade resulting from General Agreement on
Tariffs and Trade (GATT), the low exchange value of the dollar, and the economic
health of the Pacific Rim countries are responsible for a boost in exports.
The manufacturing sector is recovering, posting a gain of 3.4% in employment
during the year ended in April of 1996, largely due to the strength of the high
technology industry, which is concentrated in San Mateo County (see discussion
on San Mateo County on page 54). The biotechnology industry is growing rapidly,
both in San Mateo County and throughout the country.
San Francisco's finance, insurance, and real estate (FIRE) sector has not yet
recovered, with employment declining by 1.2% in the year ending in April 1996.
The softening of residential property markets, especially the decline in volumes
during the past year, has reduced the demand for financing and created weakness
in the real estate market. In addition, consolidation in the banking industry
continues to affect the finance sector. Two bank mergers will have an impact on
employment in San Francisco. Union Bank and Bank of California are merging, a
move which will result in the loss of approximately 850 jobs as the merger is
completed. The combined Union Bank of California will be headquartered in San
Francisco. With San Francisco-based Wells Fargo Bank taking over Los
Angeles-based First Interstate Bank, approximately 9,000 jobs will be
eliminated. Some of the retail-level and administrative jobs to be eliminated
will be in San Francisco. However, the Los Angeles headquarters of First
Interstate Bank will be affected far more significantly than the San Francisco
headquarters of Wells Fargo.
The transportation, communication, and public utilities (TCPU) sector is another
part of the San Francisco economy which is weak, with employment remaining
stable during the last year. The weakness in the TCPU sector is primarily the
result of continuing layoffs by PG&E, the giant San Francisco- based utility. In
addition, if Union Pacific overcomes federal-level concerns in its bid to
acquire Southern Pacific Railroad, nearly 1,300 Bay Area employees would lose
their jobs, and the San Francisco headquarters of Southern Pacific will be
closed. During the next three years, California is at risk to lose
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1,940 out of the 7,930 jobs the two companies currently have in the state; about
half of the jobs would be eliminated, while the other half would be transferred
out of state. San Francisco International Airport (SFO), located in San Mateo
County, is another strong force in the TCPU sector for the metropolitan area.
Government sector employment in San Francisco has been constrained by the
closure of military bases, the opening of the new federal office complex in
downtown Oakland, and pressure at the county and state level to restrain
employment growth. Government employment was up a slight 0.9% in the year ended
in April of 1996, despite federal government employment declining at a rate of
1.1% over the same period. Civilian Pentagon jobs in the San Francisco MSA have
declined from 8,000 in 1988 to an estimated 1,700 this year, largely because of
the closure of the Presidio and several smaller bases. However, the Presidio has
been turned over to the National Park Service, which is seeking tenants for many
of the vacant buildings. The first tenant was the Gorbachev Foundation. The Park
Service has also reopened the Presidio Golf Course for public use. Other
potential tenants include Golden Gate University, the American Field Service,
and the California Institute for Integral Studies. Congress may pass legislation
that would assist developers in renovating the Presidio by establishing a
federally guaranteed loan program. The bill would also allow up to $150 million
in funds to offset the costs of renovating the former Army base. An advisory
group has recommended that San Francisco consider building a theme park,
possibly oriented toward the electronics industry, on land at Treasure Island
after the Navy leaves in 1997.
FORECASTED EMPLOYMENT TRENDS
The San Francisco metropolitan area is positioned for solid, though slow,
employment growth averaging 1.6% per year between 1995 and 2000 (see Table 4.2).
While much of this growth will occur in San Mateo and, to a lesser extent, Marin
County, San Francisco County will experience moderately strong employment growth
averaging 1.1% over the 1995 to 2000 period. The growth will come more from
private sector activity, and less from government and military activity than it
has in the past. The role of San Francisco as a finance and legal center will
serve as its economic base for the long term, but industry-wide pressures will
continue to reshape this sector. For example, the Pacific Stock Exchange (PSE)
is considering leaving San Francisco. The action is mainly a result of the
proposed stock exchange transfer tax, and the proposed 2% license fee for
individuals making $150,000 or more each year in San Francisco. International
trade and tourism will also serve as long-term and growing bases of economic
activity, as will the high technology and biotechnology industries. In addition,
the newly expanded airport will contribute to the economic base of both the
metropolitan area and the county.
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TABLE 4.2
SAN FRANCISCO MSA EMPLOYMENT FORECAST
1992 1993 1994 1995 1996f 1997f 1998f 1999f 2000f
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Nonagricultural 914.4 908.3 903.7 914.1 926.6 940.5 956.5 973.6 991.3
% Change -2.7% -0.7% -0.5% 1.2% 1.4% 1.5% 1.7% 1.8% 1.8%
Construction 27.4 26.1 26.6 27.7 30.0 29.1 29.1 29.4 30.0
% Change -9.9% -4.7% 1.9% 4.1% 8.3% -3.0% -0.0% 1.0% 2.0%
Manufacturing 75.2 75.0 73.2 72.3 74.1 73.2 72.8 72.6 72.5
% Change -3.6% -0.3% -2.4% -1.2% 2.5% -1.2% -0.6% -0.3% -0.2%
T.C.P.U. 77.9 76.4 75.1 73.2 72.8 73.0 73.2 73.5 73.9
% Change 1.4% -1.9% -1.7% -2.5% -0.5% 0.3% 0.3% 0.4% 0.5%
Trade 195.4 192.0 194.1 199.6 201.9 204.1 207.0 210.3 213.9
% Change -4.9% -1.7% 1.1% 2.8% 1.2% 1.1% 1.4% 1.6% 1.7%
F.I.R.E. 101.3 100.6 98.8 95.6 94.7 96.0 97.5 98.9 100.5
% Change -3.3% -0.7% -1.8% -3.2% -0.9% 1.4% 1.5% 1.5% 1.6%
Services 303.4 308.2 308.1 319.8 329.1 340.1 351.4 363.4 375.4
% Change -0.5% 1.6% -0.0% 3.8% 2.9% 3.3% 3.3% 3.4% 3.3%
Total Government 133.3 129.4 127.1 125.4 123.5 124.5 124.7 124.9 124.6
% Change -4.0% -2.9% -1.8% -1.3% -1.5% 0.8% 0.2% 0.1% -0.2%
Total S.F. County 581.9 575.9 572.1 575.0 579.3 584.3 590.7 597.6 604.9
% Change -2.2% -1.0% -0.7% 0.5% 0.7% 0.9% 1.1% 1.2% 1.2%
Sources: Historical data-Bureau of Labor Statistics; Calculations and
forecasts-RCG.
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DEMOGRAPHIC TRENDS
Population growth in the county of San Francisco averaged 0.6% per year during
the 1980s (see Table 4.3). San Francisco's relatively slow population growth
rate can be attributed to its relatively small size and geographical constraints
(bounded by water on three sides) and relatively built-out condition. From 1990
to 1995, population growth in San Francisco accelerated slightly to a 0.7% per
year average rate. The population is disproportionately influenced by
international in-migration which is not sensitive to domestic economic cycles.
During the next five years, population growth will be fairly stable. The
trailing edge of the baby-boomers who are currently in their middle-thirties
have already largely deserted the city in favor of a suburban setting to start
or expand families, and the baby-echo generation is entering its early twenties,
the age at which they traditionally set up their own households. However, growth
in the population age groups from 19 to 34 will be slightly negative in San
Francisco during the next five years as the tail end of the baby boom generation
moves out of these age groups.
TABLE 4.3
SAN FRANCISCO COUNTY POPULATION BY AGE
Compound Annual Growth Rate
AGE GROUP 1980 1990 1995 2000 1980-1990 1990-1995 1995-2000
19 & Under 135,181 132,663 139,959 156,800 -0.2% 1.1% 2.3%
20-24 65,242 59,103 53,600 48,500 -1.0% -1.9% -2.0%
25-34 151,222 158,534 159,961 135,200 0.5% 0.2% -3.3%
35-44 81,143 129,853 139,073 139,700 4.8% 1.4% 0.1%
45-54 70,025 74,865 84,672 103,300 0.7% 2.5% 4.1%
55-64 71,876 63,561 66,231 78,800 -1.2% 0.8% 3.5%
65+ 104,285 105,380 107,488 113,600 0.1% 0.4% 1.1%
TOTAL 678,974 723,959 750,984 775,900 0.6% 0.7% 0.7%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
Fueling population growth during the 1995 to 2000 period in San Francisco will
be higher levels of net migration. Data from the Department of Motor Vehicles
for fiscal years 1989-1990 to 1994-1995 which tracks drivers' licenses, suggests
that the numbers of net migrants into San Francisco County has turned positive
once again (see Table 4.4). As the San Francisco economy weakened in the early
1990s and job growth slowed and then turned negative, the county was a net
exporter of labor. However, with the resumption of job growth in 1995, net
migration has also turned positive, as new residents move into the county to
fill job openings.
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TABLE 4.4
SAN FRANCISCO COUNTY DRIVERS LICENSE MIGRATION DATA
Estimated Net
Net Drivers Population
Fiscal Year Drivers to: Drivers from: In (Out) In (Out)
- ----------- ----------- ------------- ----------- -------------
89-90 47,116 52,288 (5,172) (7,758)
90-91 49,462 52,180 (2,718) (4,077)
91-92 50,165 52,401 (2,236) (3,354)
92-93 45,023 46,730 (1,707) (2,561)
93-94 49,484 50,339 (855) (1,283)
94-95 48,951 45,915 3,036 4,554
Sources: Historical Data-California Department of Motor Vehicles Driver License
Address Change Report-August 1990-1995; Calculations-RCG.
Household formation shows a similar pattern to population growth. In San
Francisco County, a greater number of households was formed during the five year
period from 1990 to 1995 than was formed during the entire decade of the 1980s.
During the next five years, the rate of household formation will accelerate
slightly from the rate of the past five years as the number of households headed
by people in the older age groups, also called headship rates, grows more
rapidly than the number of households headed by people in the younger age
groups, which is either shrinking or growing very slowly. Between 1995 and 2000
in San Francisco County, households will grow at an average rate of 0.7% per
year, compared with 0.5% per year during the past five years, representing the
addition of approximately 11,000 new households over the period, or, just under
2,200 new households each year (see Table 4.5).
TABLE 4.5
SAN FRANCISCO COUNTY HOUSEHOLDS BY AGE
Comp Ann Growth Rate
------------------------
Age Groups 1990 1995 2000 1990-1995 1995-2000
- ---------- ---- ---- ---- --------- ---------
15-24 14,057 13,249 12,354 -1.2% -1.4%
25-34 69,062 68,185 67,658 -0.3% -0.2%
35-44 70,284 70,712 71,579 0.1% 0.2%
45-54 46,143 52,921 60,897 2.8% 2.8%
55-64 36,976 39,133 41,982 1.1% 1.4%
65+ 69,062 69,300 69,991 0.1% 0.2%
Total 305,584 313,500 324,461 0.5% 0.7%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
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AFFORDABILITY, TENURE CHOICE, AND THE DEMAND FOR RENTAL UNITS
San Francisco has one of the least affordable single family housing stocks of
any of the nine Bay Area counties. With a median home price of $252,808 as of
year-end 1995 compared to $112,900 nationally, only 27.4% of the households in
San Francisco can afford the median-priced home. From 1990 to 1995, the
affordability of single-family housing increased in both the United States and
San Francisco County because of declining interest rates and household income
growth which outpaced the increase in home prices. Despite the increase in
housing affordability, San Francisco housing remains very expensive by any
benchmark and, thus, creates an ideal environment for rental housing. Not
surprisingly, as of the 1990 Census, nearly 65.5% of households in San Francisco
County were renters compared with 35.8% nationwide.
Moreover, the proportion of households choosing to rent was very steady during
the decade from 1980 to 1990. For this reason, we believe that the age-specific
renter proportion does not change much over time, and we think that using the
1990 age-specific renter proportion is justified during the next five years.
TABLE 4.6
AFFORDABILITY DATA
SAN FRANCISCO COUNTY AND THE UNITED STATES
1990 1991 1992 1993 1994 1995 1996a
-------- -------- -------- -------- -------- -------- --------
Median Existing
Home Price
San Francisco Cnty. $250,000 $260,000 $260,000 $250,000 $254,000 $252,808 $256,600
% Change 2.0% 4.0% 0.0% -3.8% 1.6% -0.5% 1.5%
United States $95,000 $100,300 $103,700 $106,800 $109,800 $112,900 $117,500
% Change 2.6% 5.0% 3.4% 3.0% 2.8% 2.8% 4.1%
Household Income
San Francisco Cnty. $74,100 $75,800 $80,200 $82,200 $85,600 $88,100 $91,200
% Change 8.0% 2.3% 5.8% 2.5% 4.1% 2.9% 3.5%
United States $37,403 $37,922 $39,020 $41,428 $43,845 $45,999
% Change 2.4% 1.4% 2.9% 6.2% 5.8% 4.9%
Mortgage Int. Rate 10.1% 9.2% 8.4% 7.3% 8.4% 8.0% 7.5%
Households Able to
Afford Median-
Priced Home
San Francisco Cnty. 19.3% 21.7% 28.0% 35.0% 32.2% 35.1% 37.6%
United States 50.0% 51.0% 55.0% 58.0% 57.0% 54.8%
Sources: Historical data-National Association of Realtors, Federal Reserve Board
of Governors, U.S. Bureau of the Census; Calculations and 1996 estimate-RCG.
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To calculate the underlying demographic demand for rental units in San Francisco
County during the next five years, we relied on 1990 age-specific renter
proportion data in conjunction with our projections of household growth by age
group. These projections appear in Table 4.7. In San Francisco County between
the years 1995 and 2000, we anticipate that demographic demand will exist for
nearly 5,700 rental units, or about 52% of the new households. The marginal
renter proportion of 52% is lower than the average renter proportion of 65.5%
because of a low or negative growth in young householders, which traditionally
have a high propensity to rent.
TABLE 4.7
PROJECTION OF APARTMENT DEMAND BY AGE
SAN FRANCISCO COUNTY
Change in
1990 1995 2000 Households Renter New
Age Groups Households Households Households 1995-2000 Proportion Rental/Units
15-24 14,057 13,249 12,354 (895) 94.5% (846)
25-34 69,062 68,185 67,658 (527) 86.7% (457)
35-44 70,284 70,712 71,579 867 70.1% 608
45-54 46,143 52,921 60,897 7,976 59.1% 4,714
55-64 36,976 39,133 41,982 2,849 49.7% 1,416
65+ 69,062 69,300 69,991 691 46.8% 323
Total 305,584 313,500 324,461 10,961 51.9% 5,689
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
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APARTMENT MARKET TRENDS
The market for apartment buildings with more than 100 units is extremely tight
in San Francisco, with a rental vacancy rate as of year-end 1995 of 3.1% (see
Table 4.8). Currently, the apartment vacancy rate is at its lowest point since
1988, which was the height of the last economic expansion in San Francisco
County when job market and residential market conditions were extremely strong,
as reflected in high rates of job growth, housing price appreciation and rent
growth.
TABLE 4.8
SAN FRANCISCO COUNTY RENTAL MARKET TRENDS (100+ UNITS)
1987 1988 1989 1990 1991 1992 1993 1994 1995
----- ------ ------ ------ ------ ------ ------ ------ ------
Total Stock 9,910 11,984 13,417 13,766 13,973 14,081 14,256 14,256 14,256
New Construction 0 2,074 1,433 349 207 108 175 0 0
Net Absorption (185) 2,159 1,054 126 613 90 (59) 114 140
Occupied Stock 9,573 11,732 12,786 12,913 13,526 13,616 13,557 13,672 13,811
Vacancy Rate 3.4% 2.1% 4.7% 6.2% 3.2% 3.3% 4.9% 4.1% 3.1%
Average Rent $724 $763 $798 $865 $894 $876 $886 $901 $946
Average Rent Change -2.0% 5.4% 4.6% 8.4% 3.4% -2.0% 1.1% 1.7% 5.0%
Sources: New construction, vacancy, avg. rent, & stock-RealData; Net absorption
& occupied stock calculations-RCG.
While demand is growing at a moderate rate, it is constrained by a lack of new
apartment construction. No new projects of more than 100 units have been
delivered to the San Francisco market since 1993. As a result, the rental
vacancy rate for apartment buildings with more than 100 units has tightened,
with vacancy rates falling from 4.9% in 1993 to 3.1% at year-end 1995. As a
result of the tight conditions of the apartment market, rent growth accelerated
to 5% during 1995.
The imbalance between demand and supply during recent years in the San Francisco
apartment market is illustrated in Figure 4.1. The ratio of new households to
multifamily permits has risen since the late 1980s significantly, reflecting the
much faster rate of demand growth compared to supply growth.
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- --------------------------------------------------------------------------------
FIGURE 4.1
- --------------------------------------------------------------------------------
New Households to Multifamily Permits
San Francisco County
-------------------------------------
[Graph omitted]
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
Despite extremely tight apartment market conditions, the pipeline of new
apartment projects greater than 100 units in San Francisco is fairly small, and
many of the larger projects have not finalized their build-out plans (see Table
4.9). Three main apartment projects have been proposed. Nothing is scheduled for
delivery in 1996, although the 509-unit 78-82 Natoma Street project is slated to
begin construction in late 1996 in the South of Market area. However, problems
with variances may delay construction of this project. The best case scenario is
that the first phase of 200 to 300 units would come on line in 1997. In 1998,
the two additional projects of over 100 units which are slated for delivery are
the first phase of Catellus' "North Channel" rental project, which is within the
Mission Bay area, and the Redevelopment Agency's Site K, which is a 247-unit
project in the Embarcadero area. Several other smaller rental projects are in
various stages of construction, planning or proposal, but, due to their size,
would not be included in our forecast.
TABLE 4.9
SAN FRANCISCO COUNTY APARTMENT UNIT PIPELINE
Delivery Units Project Name City Developer/Owner Status/Comments
- -------- ----- ------------ ---- --------------- ---------------
1997 200-300 78-82 Natoma St. SF PCI Part of 509-unit multifamily and
mixed-use project south of Market Street
to start in late 1996.
1998 500-600 North Channel SF Catallus First phase of Mission Bay; will apply
for entitlements in 9/96; eventually three
phases of rental units through 2005
1998 247 Site K SF Unknown Redevelopment Agency site near Embarcadero
w/unit cost of $230,000; high rise.
Source: Data gathered June of 1996 by RCG from RealData, RealFacts, Local
Developers, Local Planning Departments.
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Reflecting this small pipeline, we project that rental vacancy rates will
continue to experience downward pressure, which will keep rent growth strong, in
the 4% to 6% range, between 1995 and 2000 (see Table 4.10).
TABLE 4.10
SAN FRANCISCO COUNTY RENTAL MARKET FORECAST (100+ UNITS)
1995 1996f 1997f 1998f 1999f 2000f
Total Stock 14,256 14,256 14,456 14,956 15,206 15,406
New Construction 0 0 200 500 250 200
Net Absorption 140 130 200 250 160 150
Occupied Stock 13,811 13,941 14,141 14,391 14,551 14,701
Vacancy Rate 3.1% 2.2% 2.2% 3.8% 4.3% 4.6%
Average Rent $946 $1,006 $1,069 $1,120 $1,166 $1,212
Average Rent Change 5.0% 6.3% 6.3% 4.7% 4.2% 3.9%
Ssources: 1995 statistics-RealData; Forecasted construction-Local developers
& Planning Departments; Forecasted net absorption, vacancy & rent growth-RCG.
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San Mateo County
RECENT ECONOMIC TRENDS
The San Francisco metropolitan economy turned around during 1995, fueled largely
by growth in San Mateo's high technology and biotechnology industries, as well
as by an increase in airport-related activity. San Mateo County, sandwiched
between San Francisco and Santa Clara counties, is one of three counties which
comprise the San Francisco metropolitan area. (Since recent detailed county
level employment data is not available, we will base our discussion of the San
Mateo economy on statistics for the San Francisco metropolitan area as well as
on total employment data for San Mateo County.) While the San Francisco County
economy is driven by the finance and legal industries as well as tourism, San
Mateo County's economy is driven by the high technology and biotechnology
industries, as well as by San Francisco International Airport and related
activities. Overall metropolitan area economic growth is accelerating, and jobs
added in San Mateo County are contributing to the increase. During 1995, the San
Francisco metropolitan employment base grew by 1.2% compared to 1.5% growth for
the San Mateo County employment base.
As in southern Alameda County, growth in the high tech industry has spilled over
into San Mateo County. Oracle, the county's second largest employer with 4,300
employees in 1995, is expanding back into its former 155,000 square-foot
headquarter buildings in Belmont Hills. The company announced plans to add 3,000
employees in fiscal 1997, and it has outgrown its world headquarters in Redwood
Shores. The company is moving 500 employees who handle technical support via
phone to one building by July 1. By October, 1,450 employees will relocate into
the other building in Belmont Hills. In addition, Sun Microsystems is currently
building a one million square-foot corporate headquarters in Menlo Park.
Finally, Electronic Arts has acquired a 42-acre site in Redwood Shores on which
it will build an 800,000 square-foot office complex in four phases. Construction
on the first phase is scheduled to begin in early 1997, with completion in
mid-1998, at which time the company expects local employment to have increased
from 600 to 1,000.
The biotechnology industry is growing rapidly, both in San Mateo County and
throughout the country. The San Francisco Bay Area was home to 207 biotechnology
companies in June of 1995, fifty of which are publicly traded. This is the
highest concentration of biotech companies in the country. The fifty publicly
traded companies employed almost 14,000 with sales of $1.6 billion in 1994, a
31% increase over 1993. The presence of research universities is critical to the
nurturing and development of the
TABLE 5.1
SAN MATEO COUNTY EMPLOYMENT
1990 1991 1992 1993 1994 1995 Apr-96
------ ------ ------ ------ ------ ------ ------
Total Employment 327,943 319,913 307,824 306,738 309,882 314,530 --
% Change 1.7% -2.4% -3.8% -0.4% 1.0% 1.9% --
Unemployment Rate 2.6% 4.0% 5.1% 5.0% 4.7% 4.3% 3.6%
Sources: Bureau of Economic Analysis, California Employment Development
Department, RCG.
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bioscience industry. Resources available through Stanford University, the
University of California at Berkeley, and the University of California Medical
School in San Francisco are instrumental to the development of the bioscience
industry. San Mateo County, located in the midst of these three major
universities, is a good location for biotech companies. It is home to some of
the early pioneers in the bioscience industry. South San Francisco-based
Genentech, is considered to be one of the industry leaders and is one of San
Mateo County's largest employers. Although Genentech is not currently expanding
its operations in San Mateo County, it has a major facility under construction
north of San Francisco in Solano County.
San Francisco International Airport (SFO) is another strong force in the San
Mateo County economy. The transportation by air employment subsector is the most
highly concentrated in the metropolitan area (see Table 3.3). Employment in this
sector has decreased for the past four years as United and American Airlines
have downsized. Despite decreasing employment, United is by far the county's
largest employer, with approximately 17,000 employees in 1995. Not only does
United have a significant domestic and international flight base out of SFO, but
it also operates a maintenance base. United's employment base has decreased by
more than 1,200 over the last three years and is expected to fall further as
maintenance jobs move to United's new maintenance facility in Indianapolis. Up
to 1,000 jobs could be transferred from San Francisco to Indianapolis by 2000.
However, the Shuttle by United operation is growing, and additional
international service is being added. American Airlines also ranks among the ten
largest employers in the county, with 2,100 employees.
Although employment at some of the major airlines has decreased, traffic
activity at the airport is increasing. Passenger traffic increased 4.7% during
1995, a rate which accelerated to 10.7% between January of 1995 and 1996. Total
cargo (excluding mail) was up 2.9% during 1995, although it decreased 1.7% in
January. The bulk of the increase in both passenger and cargo traffic is
internationally-related. Passenger and cargo traffic from Mexico, the Caribbean,
and Central America declined, while activity from the Far East was up
substantially.
SFO is undergoing a $2.4 billion expansion which will make it the premier West
Coast gateway to the Pacific. A new $35 million, 7-level parking garage at the
United Airlines Maintenance and Operations Center is almost complete. The
centerpiece of the SFO expansion project is a new international terminal with 26
gates, instead of the present 10. The project also includes a ground
transportation center, light rail system, and an elevated loop roadway. The
project is scheduled for completion by 2000 and is expected to create 3,500
construction jobs during the course of construction.
Job creation in San Mateo County is limited by the lack of available office and
industrial space. At year-end 1995, the office vacancy rate was 4.9%. Office
vacancy was even lower in the southern part of the county, at 2.1%. Belmont, San
Carlos, and Redwood Shores have virtually no available space, while Redwood City
and Menlo Park have only a small amount available. The industrial market is
similarly tight, leaving little room for growth. R&D vacancy was 7.9% at
year-end 1995, and the vacancy rate for warehouse space was even lower at 6.0%.
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Transportation bottlenecks and limited availability of developable sites have
kept commercial construction to a minimum. However, a large new project is in
its preliminary stages at Bay Meadows in San Mateo. Included in the plan for 73
acres of race track land are 900,000 square feet of office space spread over
eight buildings in a campus setting, a new freeway on-ramp and off-ramp, a
200-room hotel, 750 units of condominium and townhouse housing, and a grocery
store. Furthermore, brokers in the county expect activity to increase as
build-to-suit corporate campuses, such as those previously mentioned for Sun
Microsystems and Electronic Arts, are completed during the next several years,
causing companies to put existing leased space on the market.
FORECASTED EMPLOYMENT TRENDS
We anticipate that employment growth in the San Francisco metropolitan area will
grow at a moderate pace averaging 1.6% per year between 1995 and 2000 (see Table
5.2). Job growth in San Mateo County will be slightly higher, averaging 2.5% per
year over the same period, because the high technology and biotechnology
industries in San Mateo County will be strong sources of growth. In addition,
the newly expanded airport will add to San Mateo County's job base. The county
will also experience an increase in employment in industries, such as shipping,
which are related to SFO.
TABLE 5.2
SAN FRANCISCO MSA EMPLOYMENT FORECAST
1992 1993 1994 1995 1996f 1997f 1998f 1999f 2000f
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Nonagricultural 914.4 908.3 903.7 914.1 926.6 940.5 956.5 973.6 991.3
% Change -2.7% -0.7% -0.5% 1.2% 1.4% 1.5% 1.7% 1.8% 1.8%
Construction 27.4 26.1 26.6 27.7 30.0 29.1 29.1 29.4 30.0
% Change -9.9% -4.7% 1.9% 4.1% 8.3% -3.0% -0.0% 1.0% 2.0%
Manufacturing 75.2 75.0 73.2 72.3 74.1 73.2 72.8 72.6 72.5
% Change -3.6% -0.3% -2.4% -1.2% 2.5% -1.2% -0.6% -0.3% -0.2%
T.C.P.U. 77.9 76.4 75.1 73.2 72.8 73.0 73.2 73.5 73.9
% Change 1.4% -1.9% -1.7% -2.5% -0.5% 0.3% 0.3% 0.4% 0.5%
Trade 195.4 192.0 194.1 199.6 201.9 204.1 207.0 210.3 213.9
% Change -4.9% -1.7% 1.1% 2.8% 1.2% 1.1% 1.4% 1.6% 1.7%
F.I.R.E. 101.3 100.6 98.8 95.6 94.7 96.0 97.5 98.9 100.5
% Change -3.3% -0.7% -1.8% -3.2% -0.9% 1.4% 1.5% 1.5% 1.6%
Services 303.4 308.2 308.1 319.8 329.1 340.1 351.4 363.4 375.4
% Change -0.5% 1.6% -0.0% 3.8% 2.9% 3.3% 3.3% 3.4% 3.3%
Total Government 133.3 129.4 127.1 125.4 123.5 124.5 124.7 124.9 124.6
% Change -4.0% -2.9% -1.8% -1.3% -1.5% 0.8% 0.2% 0.1% -0.2%
Total San Mateo Cty 307.8 306.7 309.9 314.5 321.3 328.7 337.0 345.9 354.2
% Change -3.8% -0.4% 1.0% 1.5% 2.1% 2.3% 2.5% 2.6% 2.4%
Sources: Historical data-Bureau of Labor Statistics; Calculations and
forecasts-RCG.
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DEMOGRAPHIC TRENDS
Stronger economic trends during recent years have resulted in stronger
demographic trends in San Mateo County. Stronger job growth during 1994 and 1995
caused population growth in San Mateo County to accelerate from very slow growth
in the early 1990s to a 1% per year average for the five-year period between
1990 and 1995. As a result, population growth has averaged 1% per year since
1980 (see Table 5.3). Based on forecasted economic trends and other factors,
such as growth potential, we estimate that population growth will be fairly
steady at 1.0% between 1995 and 2000. The age-specific growth rates indicate a
pattern similar to the other counties under study. The middle and older age
groups will grow more rapidly during the 1990s, while the 25 to 44 year-old
group will grow more slowly, as the baby-dearth generation moves through this
age group of the population. The youngest age group will show more rapid growth
during the 1990s than in the 1980s due to the "echo" baby boom.
TABLE 5.3
SAN MATEO COUNTY POPULATION BY AGE
Compound Annual Growth Rate
---------------------------------------
Age Group 1980 1990 1995 2000 1980-1990 1990-1995 1995-2000
- --------- ---- ---- ---- ---- --------- --------- ---------
19 & Under 157,785 157,884 170,900 179,200 0.0% 1.6% 1.0%
20-24 51,077 46,450 42,500 41.900 -0.9% -1.8% -0.3%
25-34 106,394 122,716 118,100 114,800 1.4% -0.8% -0.6%
35-44 77,224 110,280 113,200 116,900 3.6% 0.5% 0.6%
45-54 67,823 74,503 83,600 91,500 0.9% 2.3% 1.8%
55-64 64,978 57,792 65,300 74,600 -1.2% 2.5% 2.7%
65+ 62,048 79,998 87,600 96,900 2.6% 1.8% 2.0%
Total 587,329 649,623 681,200 715,800 1.0% 1.0% 1.0%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
The effect of improved economic trends on demographic trends is evident in
looking at net migration data. As the high technology industry began to recover
during 1994, San Mateo's economic conditions began to improve, attracting an
increasing flow of new residents to fill new job openings. While exact data on
net migration is not available, the number of net drivers surrendering drivers'
licenses provides a trend line for net migration, if not an exact absolute level
(see Table 5.4). Through the early 1990s, as the economy was weakening, the net
number of drivers was negative. However, starting in fiscal year 1993-1994, as
economic conditions in San Mateo County began to stabilize, the estimated net
population flow based on the Department of Motor Vehicle drivers license data
for fiscal years 1989-1990 to 1995-1995 turned positive. Based on our employment
forecasts for San Mateo County and the counties to the north and south, San
Francisco and Santa Clara County (since many San Mateo residents commute to
these counties), we anticipate that net migration will continue to be an
important source of population growth for San Mateo County during the remainder
of the decade.
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TABLE 5.4
SAN MATEO COUNTY DRIVERS LICENSE MIGRATION DATA
Estimated Net
Net Drivers Population
Fiscal Year Drivers to: Drivers from: In (Out) In (Out)
- ----------- ----------- ------------- ----------- -------------
89-90 39,152 44,192 (5,040) (7,560)
90-91 39,346 43,123 (3,777) (5,666)
91-92 38,449 41,759 (3,310) (4,965)
92-93 33,999 36,750 (2,751) (4,127)
93-94 40,490 40,182 308 462
94-95 39,810 36,233 3,577 5,366
Source: California Department of Motor Vehicles
Household formation rates in San Mateo County will accelerate somewhat between
1995 and 2000 as the number of young residents forming households, many of them
the leading edge of the "echo" baby boom, increases. Household growth will
accelerate to 0.9% per year in the 1995 to 2000 period, compared to 0.6% during
the prior five years (see Table 5.5). The discrepancy between population and
household growth results when most of the population growth is in the age groups
that have the highest headship rates, and weak population growth in the age
groups with lower headship rates. During the 1995 to 2000 period, we estimate
that about 11,300 new households will be formed in San Mateo County.
TABLE 5.5
SAN MATEO COUNTY HOUSEHOLDS BY AGE
Comp Ann Growth Rate
------------------------
Age Groups 1990 1995 2000 1990-1995 1995-2000
- ---------- ---- ---- ---- --------- ---------
15-24 7,815 8,052 9,124 0.6% 2.5%
25-34 51,405 52,966 50,050 0.6% -1.1%
35-44 57,828 59,584 57,216 0.6% -0.8%
45-54 42,195 43,476 50,832 0.6% 3.2%
55-64 33,517 34,535 40,405 0.6% 3.2%
65+ 49,154 50,646 52,918 0.6% 0.9%
Total 241,914 249,259 260,545 0.6% 0.9%
Sources: Historical data-U.S. Census Bureau; Calculations and forecasts-RCG.
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AFFORDABILITY, TENURE CHOICE, AND THE DEMAND FOR RENTAL UNITS
Single-family homes are very expensive in San Mateo County and, by comparison to
the U.S., not nearly as affordable (see Table 5.6). As of year-end 1995, the
median existing home price for San Mateo County was $257,784, well over double
the national median existing home price of $112,900. Incorporating data on
household income and mortgage rates, we estimate that only 34.2% of households
in San Mateo County were able to afford the median-priced home in 1995, compared
to 54.8% for the U.S. during the same period.
As a result of the highly expensive housing stock, many households choose to
rent. As of the 1990 Census, 39.8% of households in San Mateo County were
renters compared with 35.8% nationwide. While the proportion of households
choosing to rent was relatively steady during the decade from 1980 to 1990, we
anticipate that the marginal rate of households choosing to rent will decline
for one main reason. There will be a net decline in the number of households in
age groups which have a high rate of rental tenure. While housing affordability
has increased during the last five years, primarily as a result of declining
interest rates, the effect of increased affordability has been largely offset by
changing lifestyle preferences and changing perceptions about the usefulness of
housing as a tool for savings or investment.
TABLE 5.6
AFFORDABILITY DATA
SAN MATEO COUNTY AND THE UNITED STATES
1990 1991 1992 1993 1994 1995 1996e
---- ---- ---- ---- ---- ---- -----
Median Existing Home Price
- --------------------------
San Mateo County $262,000 $259,000 $258,000 $253,000 $259,000 $257,784 $261,651
% Change 0.8% -1.1% -0.4% -1.9% 2.4% -0.5% 1.5%
United States $ 95,500 $100,300 $103,700 $106,800 $109,800 $112,900 $117,500
% Change 2.6% 5.0% 3.4% 3.0% 2.8% 2.8% 4.1%
Household Income
- ----------------
San Mateo County $ 74,100 $ 75,800 $ 80,200 $ 82,200 $ 85,600 $ 88,100 $ 91,200
% Change 8.0% 2.3% 5.8% 2.5% 4.1% 2.9% 3.5%
United States $ 37,403 $ 37,922 $ 39,020 $ 41,428 $ 43,845 $ 45,999
% Change 2.4% 1.4% 2.9% 6.2% 5.8% 4.9%
Mortgage Int. Rate 10.1% 9.2% 8.4% 7.3% 8.4% 8.0% 7.5%
- ------------------
Households Able to Afford Median-Priced Home
- --------------------------------------------
San Mateo County 18.0% 21.9% 28.4% 34.5% 31.3% 34.2% 36.8%
United States 50.0% 51.0% 55.0% 58.0% 57.0% 54.8%
Sources: Historical data-National Association of Realtors, Federal Reserve
Board of Govenors, U.S. Bureau of the Census; Calculations and 1996 estimate-RCG.
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Using the household by age forecasts and applying the rates of tenure by age
group shown in Table 5.7, we calculate a five-year forecast for apartment
housing demand in San Mateo. Between 1995 and 2000, we anticipate that
demographic demand will exist for more than 2,000 apartment units, or about 18%
of the new households. As mentioned previously, the marginal renter proportion
of 18% is lower than the average renter proportion of 39.8% because of a low or
negative growth in the young householders, the age-groups that traditionally
have a high propensity to rent.
TABLE 5.7
PROJECTION OF APARTMENT DEMAND BY AGE
SAN MATEO COUNTY
Change in
1990 1995 2000 Households Renter New
Age Groups Households Households Households 1995-2000 Proportion Rental Units
15-24 7,815 8,052 9,124 1,072 87.9% 942
25-34 51,405 52,966 50,050 (2,916) 65.9% (1,922)
35-44 57,828 59,584 57,216 (2,368) 41.1% (973)
45-54 42,195 43,476 50,832 7,356 27.8% 2,045
55-64 33,517 34,535 40,405 5,870 23.8% 1,397
65+ 49,154 50,646 52,918 2,272 25.2% 573
Total 241,914 249,259 260,545 11,286 18.3% 2,065
Sources: Historical data-U.S. Census Bureau;
Calculations and forecasts-RCG.
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APARTMENT MARKET TRENDS
The San Mateo apartment market is a fairly small market consisting of
approximately 16,000 units in buildings with over 100 units. San Mateo County's
location between the San Jose and San Francisco labor markets has made it a
popular rental market. However, low vacancy rates have kept rents fairly high,
not far below rents in Santa Clara County. In addition, due to the limited
development opportunities in San Mateo County, between 1990 and 1994, there was
no construction of apartment projects with more than 100 units, which has put
additional pressure on the market. While during 1995, 220 high-quality units
were delivered to the market by Bay Apartment Communities (a conversion of two
properties, Kimberly Woods and Pacific Highlands in Pacifica, into a new project
called Sea Ridge), the vacancy rate still declined, as demand growth surpassed
new construction. During 1995, rents grew at a rate of nearly 6% and the rental
vacancy rate fell to 2.8%, the lowest it has been since 1990 (see Table 5.8).
TABLE 5.8
SAN MATEO COUNTY APARTMENT MARKET TRENDS (100+ UNITS)
1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ -----
Total Stock 14,959 15,267 15,415 15,600 15,600 15,600 15,600 15,600 15,820
New Construction 1,194 308 148 185 0 0 0 0 220
Net Absorption 1,097 319 195 151 (112) 296 (339) 56 301
Occupied Stock 14,506 14,824 15,019 15,169 15,057 15,354 15,015 15,071 15,372
Vacancy Rate 3.0% 2.9% 2.6% 2.8% 3.5% 1.6% 3.8% 3.4% 2.8%
Average Rent $697 $717 $744 $782 $808 $815 $841 $864 $915
Avg Rent Change 1.2% 2.9% 3.8% 5.1% 3.3% 0.9% 3.2% 2.7% 5.9%
Sources: New construction, vacancy, avg. rent, & stock-RealData; Net
absorption & occupied calculations-RCG.
Some of the tightest submarkets as of year-end 1995 in San Mateo County were in
the southern portion of the county in Foster City and San Mateo, where apartment
vacancy rates were in the high 2% range. Average rents per square foot for
apartment projects with more than 100 units were relatively high even by Bay
Area standards. In Foster City, apartment rents in projects with over 100 units
ranged from $0.92 up to $1.48 per square foot and averaged $1.28 per square
foot. In Redwood City and San Mateo, the range was similar, and rents averaged
$1.25 and $1.14 per square foot, respectively. In both Foster City and San
Mateo, slightly higher rental vacancy rates were found in older apartment
projects built prior to 1975 where rents were below the city average.
Due to the small size of the San Mateo County apartment market, additions to
supply are "lumpy". However, Figure 5.1 illustrates the degree to which demand
has grown faster than supply, particularly in certain years. The ratio of total
household growth to total multifamily permits issued has been very high,
surpassing 10.0 in three of the last seven years.
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- ------------------------------------------------------------------------------
FIGURE 5.1
- ------------------------------------------------------------------------------
NEW HOUSEHOLDS TO MULTIFAMILY PERMITS
SAN MATEO COUNTY
[GRAPHIC OMITTED]
Because of the lack of developable sites, there is comparatively little in the
San Mateo County construction pipeline (see Table 5.9). No large projects are
expected to be completed in 1996, although one project is in the pipeline for
1997. Bridge Housing is planning the 102-unit City Park Townhouses in Foster
City, which would include 60 affordable units for seniors. By 1998 three
additional projects with 800 units could be completed. M.H. Podell will build
170 units in Redwood Shores; Sobrato will build 430 units at Fashion Island;
and, in a less desirable location in Redwood City, Thompson Residential will
build 200 units. By 1999 or 2000, the Bay Meadows site may be developed, which
would represent the addition of approximately 600 units to the market.
TABLE 5.9
SAN MATEO APARTMENT UNIT PIPELINE
Delivery Units Project Name City Developer/Owner Status/Comments
- -------- ----- ------------ ---- --------------- ---------------
1997/98 102 City Park Twnhses Foster City Bridge Housing 60 senior housing units; 42 market rate.
1998 170 Lido Lot #7 Redwood Shores M.H. Podell Developer is in process of finalizing.
1998 430 Fashion Island San Mateo Sobrato 74-acre mixed use project.
1998 200 RMC Lonestar Site Redwood City Thompson Res.
1999 600 Bay Meadows San Mateo Bay Meadows Corp. On market.
Sources: Data gathered June of 1996 by RCG from RealData, RealFacts, Local
Developers, Local Planning Depts.
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In our opinion, the lack of new construction in 1996 will cause the vacancy rate
to drop to 2.2% during 1996 and potentially even lower in 1997 (see Table 5.10).
Average rents, which jumped almost 6% during 1995, could increase by 6% to 7%
during 1996 and 1997, due to the extremely tight apartment market conditions in
San Mateo County and the apartment markets to the north and south, in San
Francisco and Santa Clara Counties. However, as new rental units begin to be
delivered to the market in 1998, apartment market conditions should ease,
allowing vacancy rates to rise to a more optimal level of 3.5% to 4%.
TABLE 5.10
SAN MATEO COUNTY APARTMENT MARKET FORECAST (100+ UNITS)
1995 1996f 1997f 1998f 1998f 2000f
------ ------ ------ ------ ------ ------
Total Stock 15,820 15,820 15,922 16,722 17,022 17,322
New Construction 220 0 102 800 300 300
Net Absorption 301 100 150 500 450 350
Occupied Stock 15,372 15,472 15,622 16,122 16,572 16,922
Vacancy Rate 2.8% 2.2% 1.9% 3.6% 2.6% 2.3%
Average Rent $915 $977 $1,047 $1,103 $1,174 $1,252
Average Rent Change 5.9% 6.8% 7.1% 5.4% 6.4% 6.7%
Sources: 1995 statistics-RealData; Forecasted construction-Local developers &
Planning Departments; Forecasted net absorption, vacancy & rent growth-RCG.
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Attachment-Rosen Consulting Group's Services
ROSEN CONSULTING GROUP (RCG) IS A BERKELEY-BASED CONSULTING FIRM ENGAGED IN REAL
ESTATE ECONOMICS AND FINANCIAL CONSULTING. RCG was established as a vehicle for
Dr. Kenneth Rosen, Chairman of the Center for Real Estate and Urban Economics at
the University of California at Berkeley, to provide consulting services to real
estate investors, advisors, developers and lenders. RCG provides objective real
estate market research and sophisticated financial structuring advice.
Specifically, RCG offers the following services:
- QUARTERLY ANALYSIS OF THE ECONOMIC, DEMOGRAPHIC, AND REAL ESTATE
MARKET CONDITIONS IN 70 MAJOR METROPOLITAN AREAS (MSAs) in the United States,
available on a subscription basis. The Quarterly Outlook Report is tailored to
display information in a manner specified by the client. A list of subscription
clients is attached. The Quarterly Outlook Report contains
Economic conditions, including monthly employment growth by
one-digit SIC categories and quarterly data on personal income,
retail sales, and inflation;
Demographic data, including population by age, household
formations by age and type, births and deaths, and net
in-migration;
Real estate market conditions, including monthly data on building
permits for single-family and multi-family housing, office
buildings, industrial buildings, and retail space. Data on
absorption, new construction, vacancy rates, rents, values, cap
rates, and mortgage markets are also provided where available;
Analysis and commentary for each MSA; and
A section on the national economy, the regional economies, and
each product type by region.
- STRATEGIC ASSET ANALYSIS. In retrospect, one of the problems that real
estate investors, appraisers, and lenders have had in the past is that proforma
statements, on which discounted cash flow (DCF) analyses were based, had no
basis in reality. To rectify this situation, we produce discounted cash flow
(DCF) analyses of specific real estate assets aimed at disposition pricing,
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loan recovery, and asset purchase that have a firm grounding in future expected
real estate market conditions.
In order to produce our DCF analysis, we use values for proforma line
items that are derived from our macro analysis of the local real
estate market. The analysis uses our knowledge of the economics and
demographics of local markets to formulate a rational set of
assumptions about the occupancy rate and rental rate increases or
decreases that will occur during the forecast horizon. We then couple
this information with asset-specific data developed with the client.
Using a discount rate that reflects the opportunity cost of capital,
we then produce a DCF value for the asset.
The Strategic Asset Analysis couples our strength in analyzing real
estate market conditions, or the macro data analysis, with the strength of the
client in knowing the tenant base, or the micro data analysis. This synthesis
of micro and macro information is used to produce proforma statements and DCF
analyses that are firmly grounded in the current and expected future market
conditions of the local market.
- PRIVATE LABEL STUDIES on real estate and financial topics of the
clients' choosing. Completed RCG studies are presented in the
attached list.
Research reports can cover a variety of topics, including
geographic market studies, product type studies, financial
structuring strategies, investment strategies, and evaluations of
specific assets. Research reports are prepared at the request of
our clients and are used for either internal or external
purposes.
The prototype for these reports is the real estate research
report series that Ken Rosen developed at Solomon Brothers as
founder of their real estate research department.
- CONSULTING ON DEAL STRUCTURING, financial strategies for specific
transactions, and valuation of real estate transactions using
disequilibrium market forecasting techniques.
RCG provides assistance in evaluating individual transactions. RCG's
support is strategic and analytic in nature. In particular, RCG
analyzes transactions from the viewpoint of potential and future
market conditions. This work involves the use of disequilibrium
forecasting techniques pioneered by Ken Rosen.
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_ CONSULTING ON PORTFOLIO MANAGEMENT including liability and asset side
strategies.
Successful real estate investment is dependent on appropriately
matching assets and liabilities. A wide range of techniques exists
for modeling, analyzing, and immunizing the real estate investor from
swings in financial markets. RCG specializes in providing an
objective analytical view of the range of capital market techniques
available to the real estate investor. RCG monitors and advises
clients on the appropriate timing of transactions. RCG also advises
clients on hedging techniques to reduce financial risk.
_ ASSISTANCE IN DEVELOPING NEW CAPITAL AND INVESTMENT SOURCES.
During the past fifteen years, Ken Rosen has developed contacts in
both the financial and product side of the real estate business. As
a result, RCG is positioned to provide clients on both sides of the
market with traditional merchant banking services.
_ SPEECHES AND PRESENTATIONS TO INTERNAL OR EXTERNAL GROUPS.
Ken Rosen is one of the most sought-after speakers for real estate
seminars and events. He provides a timely, accurate, and
understandable analysis of current economic and real estate market
conditions.
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Staff Biographies
KENNETH T. ROSEN
Ken Rosen is President of the Rosen Consulting Group. In addition, Mr. Rosen is
a Professor of Business Administration and Chairman of the Center for Real
Estate and Urban Economics at the University of California, Berkeley.
In prior business ventures, Mr. Rosen co-founded Regional Data Associates (RDA)
in 1976, a leading real estate forecasting firm. RDA was sold to Chase
Manhattan Bank in 1982 and became part of the Chase Econometric forecasting
system. In 1985, he joined Salomon Brothers Inc as Consultant/Manager and
founded the firm's Real Estate Research Department which is recognized as Wall
Street's leading real estate research group.
Mr. Rosen received his Ph.D. from Massachusetts Institute of Technology in
Economics in 1974 and B.A. with highest honors from University of Connecticut in
1970. He was a Professor of Economics at Princeton University from 1975 to
1979. He is a trustee of the Urban Land Institute and a director of Golden West
Financial Corporation. He has authored over 75 articles and books on real
estate and real estate finance.
ARIANNA K. VAN MEURS
Arianna Van Meurs is Executive Vice President of Rosen Consulting Group. She is
responsible for all research operations at RCG and the quarterly report. She is
the lead on special projects and responsible for client relationships.
Between 1988 and 1990, when she joined RCG, Ms. Van Meurs was an Associate in
Real Estate Finance at Salomon Brothers Inc. From 1985 to 1987, Ms. Van Meurs
worked as a Consultant at the World Bank where she appraised housing finance
loans to several countries, including Tunisia, Mexico, and Korea.
Ms. Van Meurs earned the B.A. from Brown University in 1981, a Masters in City
and Regional Planning in 1983 and a Masters in Business Administration in 1989,
both from the University of California, Berkeley.
DANIEL T. VAN DYKE
Daniel Van Dyke is Senior Vice President at the Rosen Consulting Group. Mr. Van
Dyke's responsibilities at RCG include RE modeling, lead on special studies, and
banking client relationships.
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Mr. Van Dyke has twenty years of experience as a professional economist in
banking (Bank of America), consulting (SRI International, Data Resources, North
Bay Group), and academics (California Institute of Technology, University of
Santa Clara). His research experience includes regional economics, real estate
economics, and financial markets. Most recently, Mr. Van Dyke was head of the
U.S. Forecasting Section at the Bank of America where his efforts resulted in
the Silbert award for timeliness and accuracy in business forecasting.
Mr. Van Dyke earned the Ph.D. from Claremont Graduate School in 1971, where he
was a Haynes, California State, and NDEA fellow. He earned the B.A. with high
honors from California State University, Fresno in 1966, where he was inducted
into Phi Kappa Phi. Mr. Van Dyke has published a book on environmental
economics, numerous articles in refereed academic journal, dozens of consulting
reports, and scores of bank publications, including a monthly newsletter on
business and financial conditions.
MATTHEW J. ANDERSON
Matthew Anderson is Vice President of Rosen Consulting Group. Mr. Anderson's
responsibilities include economic modeling, real estate modeling, and systems
operations.
Before coming to RCG Mr. Anderson founded Anderson Property Consulting
specializing in real estate acquisitions consulting. From 1987-1988, he
co-managed Pakall Inc., a packing and shipping firm. From 1986 to 1987 he
worked as a Research Associate at Finplan Inc., a consultancy to Scandinavian
technology firms.
Mr. Anderson earned the Masters in Business Administration from the University
of California, Berkeley in 1990. He received a B.A. in German Literature from
the University of California, Santa Cruz in 1985.
SUSAN G. UNDERBERG
Susan Underberg is a Vice President at the Rosen Consulting Group. She oversees
the commercial real estate database and is responsible for special projects.
From 1987 to 1989, Ms. Underberg was an analyst in the finance department at
American Airlines where she evaluated the financial impact of projects ranging
from aircraft retirement to health claims.
Ms. Underberg earned a Masters in Business Administration in 1991 from the Haas
School of Business at the University of California, Berkeley. She also earned a
Bachelor's in Business Administration from the University of Michigan School of
Business in 1987.
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ADDENDUM--ADDITIONAL DATA TABLES
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PRIMARY MARKETS EMPLOYMENT DATA
Comp Ann Growth Rate
--------------------------------------------
County 1980 1990 1995 2000 1980-90 1990-95 1995-00 1990-00
- ------ ---- ---- ---- ---- ------ ------- ------- -------
Alameda 527.2 649.0 647.1 718.4 2.1% -0.1% 2.1% 1.0%
San Francisco 599.9 628.6 575.0 604.9 0.5% -1.8% 1.0% -0.4%
San Mateo 265.6 327.9 314.5 354.2 2.1% -0.8% 2.4% 0.8%
Santa Clara 675.4 814.5 828.0 965.2 1.9% 0.3% 3.1% 1.7%
Total 2068.2 2420.0 2364.7 2642.7 1.6% -0.5% 2.2% 0.9%
Absolute 351.9 -55.4 278.0 222.7
% Change 17.0% -2.3% 11.8% 9.2%
Sources: Historical-U.S. Bureau of Labor Statistics,
Calculations & Forecasts-Rosen Consulting Group
SEASONALLY ADJUSTED UNEMPLOYMENT RATE
BAY AREA
1995 December 5.3%
1996 January 4.8%
February 4.9%
March 4.8%
April 4.5%
Source: Bureau of Labor Statistics
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PRIMARY MARKETS POPULATION
Comp Ann Growth Rate
-------------------------
County 1980 1990 1995 2000 1980-1990 1990-2000
- ------ ---- ---- ---- ---- --------- ----------
Santa Clara 1,295,073 1,497,577 1,594,900 1,705,900 1.5% 1.3%
Alameda 1,105,379 1,276,702 1,349,600 1,430,000 1.5% 1.1%
San Francisco 678,974 723,959 750,984 775,900 0.6% 0.7%
San Mateo 587,329 649,623 681,200 715,800 1.0% 1.1%
Total 3,666,755 4,147,861 4,376,684 4,627,800 1.2% 1.1%
Absolute Change 481,106 479,739
% Change 13.1% 11.6%
Sources: Historical-U.S. Bureau of Labor Statistics,
Calculations & Forecasts-Rosen Consulting Group
POPULATION FORECAST FOR THE NINE COUNTY BAY AREA
1995 2000f
---- ----
Nine County Bay Area (000) 6,329 6,668
CAGR* 1995-2000 1.1%
New People Added 339,000
New People Added/Yr. 67,800
*Compound Annual Growth Rate
Sources: Historical-U.S. Census Bureau, Calculations & Forecasts-RCG.
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PRIMARY MARKETS HOUSEHOLDS
Comp Ann Growth Rate
-------------------------
County 1980 1990 1995 2000 1980-1990 1990-2000
- ------ ---- ---- ---- ---- --------- ---------
Santa Clara 458,519 520,179 543,570 576,765 1.3% 1.0%
Alameda 426,093 479,518 493,329 519,397 1.2% 0.8%
San Francisco 298,956 305,584 313,500 324,461 0.2% 0.6%
San Mateo 225,201 241,914 249,259 260,545 0.7% 0.7%
Total 1,408,769 1,547,195 1,599,658 1,681,168 0.9% 0.8%
Absolute Change 138,426 133,973
% Change 9.8% 8.7%
Sources: Historical-U.S. Census Bureau, Calculations & Forecasts-Rosen
Consulting Group
HISTORICAL AND PROJECTED HOUSEHOLD GROWTH
NINE-COUNTY BAY AREA
New H.H. Formed Average H.H.
Year Households (000) CAGR* from 1980 Since 1980 Growth/Yr.
---- ---------------- --------------- --------------- ------------
1980 1,979.2
1990 2,256.0 1.3% 276.8 27.7
1995 2,357.4 1.2% 378.2 25.2
2000f 2,520.2 1.2% 540.9 27.0
* CAGR: Compound Annual Growth Rate
Sources: Historical-U.S. Census Bureau, Calculations & Forecasts-Rosen
Consulting Group
PERCENTAGE OF HOUSEHOLDS BETWEEN
THE AGES OF 25 AND 44
1990 1995
Primary Markets 48.1% 46.7%
U.S. 43.9% 42.5%
Sources: historical data U.S. Census Bureau,
calculations Rosen Consulting Group
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MEAN HOUSEHOLD INCOME
BAY AREA VS. U.S.
1995e 1996f
----- -----
Primary Markets n.a. 87,354
San Francisco Bay Area 80,432 84,040
U.S. 44,589 46,027
Sources: historical data U.S. Census Bureau, forecasts and
calculations Rosen Consulting Group
1995 BAY AREA MEAN HOUSEHOLD INCOME
Total Household
MSA Households Income Weight Share
- --- ---------- --------- ------ -----
Oakland 822,900 74,400 34.9% 26,000
San Francisco 665,600 88,100 28.3% 24,902
San Jose 543,570 87,400 23.1% 20,175
Santa Rosa 159,000 67,800 6.8% 4,578
Vallejo-Fairfield-Napa 163,700 68,200 7.0% 4,741
Bay Area Weighted Avg 2,354,770 385,900 100.0% 80,397
Sources: historical data U.S. Census Bureau, calculations Rosen Consulting
Group
1995 PRIMARY MARKETS MEAN HOUSEHOLD INCOME
Household
County Income Weight Share
------ --------- ------ -----
Santa Clara 87,400 33.6% 29,366
Alameda 74,400 31.0% 23,064
San Francisco 88,100 19.8% 17,444
San Mateo 88,100 15.6% 13,744
338,000 100.0% 83,618
Sources: historical data U.S. Census Bureau, calculations Rosen
Consulting Group
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- -------------------------------------------------------------------------------
Bay Area Existing Median Home Price
MSA 1990 1991 1992 1993 1994 1995 1996e
- --- ------- ------- ------- ------- ------- ------- -------
Oakland
Price 259,000 262,420 259,250 256,200 255,600 254,500 258,979
Stock 534.7 538.7 544.3 549.0 554.9 560.3 566.1
San Francisco
Price 259,000 262,420 259,250 256,200 255,600 254,400 258,216
Stock 340.5 341.5 342.2 342.9 343.9 345.1 346.5
San Jose
Price 268,890 256,640 248,260 246,510 254,390 253,372 260,878
Stock 353.6 355.3 357.1 358.9 361.0 363.2 365.7
Santa Rosa
Price 201,400 208,776 218,094 214,284 212,170 214,749 221,191
Stock 122.1 124.1 125.9 127.6 129.8 131.5 133.4
Vallejo-Fairfield-Napa
Price 179,178 185,740 194,030 190,640 188,760 192,743 196,983
Stock 120.9 122.7 124.7 126.4 128.2 129.5 131.2
Total Bay Area-3 MSA 261,846 260,758 256,095 253,420 255,253 254,106 259,315
Total Bay Area-5 MSA 250,041 250,196 247,713 244,828 245,953 245,527 250,719
Total U.S. 95,500 100,300 103,700 106,800 109,800 112,900 117,500
Note: Total Bay Area is a weighted average calculation based on single family stock for each of three
or five metropolitan areas: Oakland (Alameda, Contra Costa Counties); San Francisco (Marin, SF,
San Mateo Counties); San Jose (Santa Clara County); Santa Rosa (Sonoma County); Vallejo-Fairfield-Napa
(Napa, Solano Counties)
Sources: historical data U.S. Census Bureau, and National Association of Realtors, calculations and forecasts
Rosen Consulting Group
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LIMITED SUPPLY
MULTIFAMILY PERMITS ISSUED
NINE-COUNTY BAY AREA
Year Permits, Units
---- --------------
1986 25,197
1987 18,452
1988 12,499
1989 11,924
1990 8,596
1991 6,738
1992 4,265
1993 4,158
1994 4,521
1995 4,098
Source: U.S. Census Bureau
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RENTAL TENURE
PERCENTAGE OF HOUSEHOLDS WHICH RENT
1990
----
Primary Markets 47%
9-County Bay Area 44%
U.S. 36%
Sources: 1990 Census, calculations Rosen Consulting Group
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LIMITED HOME AFFORDABILITY
PERCENTAGE OF HOUSEHOLDS ABLE TO AFFORD
THE MEDIAN-PRICED HOME
1995
----
Primary Markets 41%
9-County Bay Area 36%
U.S. 55%
Source: U.S. Census Bureau, California Association of Realtors,
Rosen Consulting Group
1995 PRIMARY MARKETS AFFORDABILITY
County Affordability Households Weight Share
- ------ ------------- ---------- ------ -----
Santa Clara 42.9% 543,570 34.0% 14.6%
Alameda 47.4% 493,329 30.8% 14.6%
San Francisco 35.1% 313,500 19.6% 6.9%
San Mateo 34.2% 249,259 15.6% 5.3%
-------- ------ -----
Total Primary Markets 1,599,658 100.0% 41.4%
Note: Total Primary Markets is a weighted average calculation based on
households
Sources: U.S. Census Bureau, California Association of Realtors,
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VACANCY RATE AND AVERAGE RENT
1993 Inventory Available Vac. Rate Avg. Rent
- ---- --------- --------- --------- ---------
Alameda 30,401 1,581 5.2% $792
San Francisco 14,256 699 4.9% $886
San Mateo 15,600 583 3.8% $841
Santa Clara 50,934 2,496 4.9% $887
111,191 5,368 4.8% $854
1994 Inventory Available Vac. Rate Avg. Rent
- ---- --------- --------- --------- ---------
Alameda 30,401 1,277 4.2% $803
San Francisco 14,256 584 4.1% $901
San Mateo 15,600 530 3.4% $864
Santa Clara 50,934 2,190 4.3% $886
111,191 4,582 4.1% $862
1995 Inventory Available Vac. Rate Avg. Rent
- ---- --------- --------- --------- ---------
Alameda 30,808 1,047 3.4% $820
San Francisco 14,256 442 3.1% $946
San Mateo 15,820 443 2.8% $915
Santa Clara 51,606 1,135 2.2% $971
112,490 3,068 2.7% $919
1996e Inventory Available Vac. Rate Avg. Rent
- ----- --------- --------- --------- ---------
Alameda 31,308 1,002 3.2% $863
San Francisco 14,322 329 2.3% $1,005
San Mateo 15,820 348 2.2% $977
Santa Clara 52,252 888 1.7% $1,037
113,702 2,568 2.3% $977
Sources: historical data, RealData, calculations and forecasts
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ORANGE COUNTY RATIO OF NEW HOUSEHOLDS TO MULTIFAMILY PERMITS
Ratio of
Multifamily Change in New HH
Year Permits Households Households to MF Perm
- ---- ----------- ---------- ---------- ----------
80 3,896 686,267
81 5,272 699,992 13,725 2.60
82 2,526 713,992 14,000 5.54
83 5,985 728,272 14,280 2.39
84 7,648 742,837 14,565 1.90
85 11,418 756,956 14,118 1.24
86 15,101 773,386 16,430 1.09
87 15,304 787,941 14,554 0.95
88 11,941 804,085 16,145 1.35
89 8,745 822,776 18,690 2.14
90 7,605 829,513 6,737 0.89
91 2,968 834,500 4,987 1.68
92 2,247 846,381 11,881 5.29
93 1,903 853,944 7,564 3.97
94 4,882 864,145 10,201 2.09
95 2,255 876,104 11,959 5.30
96e 3,748 889,372 12,268 3.54
Source: Historical - U.S. Census Bureau, Calculations & Forecasts - Rosen
Consulting Group
ORANGE COUNTY APARTMENT NEW CONSTRUCTION
YEAR
----
1986 6,568
1987 5,870
1988 6,770
1989 5,871
1990 2,939
1991 2,967
1992 674
1993 810
1994 (290)
1995 1,759
1996e 1,735
1997f 1,950
1998f 2,150
1999f 2,450
2000f 2,650
Source: Historical - Research Network Ltd., Calculations & Forecasts - Rosen
Consulting Group
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PRIMARY MARKETS RATIO OF NEW HOUSEHOLDS TO MULTIFAMILY PERMITS
Ratio of
Multifamily Change in New HH
Year Permits Households Households to MF Perm
- ---- ----------- ---------- ---------- ----------
80 6,915 1,409,164
81 4,810 1,422,288 13,124 2.73
82 4,639 1,435,558 13,270 2.86
83 7,540 1,448,977 13,418 1.78
84 9,366 1,462,545 13,568 1.45
85 12,031 1,476,264 13,719 1.14
86 14,548 1,490,136 13,873 0.95
87 13,391 1,504,164 14,028 1.05
88 8,224 1,518,348 14,184 1.72
89 7,723 1,532,691 14,343 1.86
90 5,404 1,547,195 14,504 2.68
91 4,750 1,557,541 10,346 2.18
92 3,171 1,566,499 8,958 2.83
93 3,206 1,575,522 9,023 2.81
94 4,158 1,584,611 9,088 2.19
95 2,798 1,599,658 15,047 5.38
96e 3,461 1,615,627 15,969 4.61
Source: Historical - U.S. Census Bureau, Calculations & Forecasts - Rosen
Consulting Group
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SANTA CLARA COUNTY RATIO OF NEW HOUSEHOLDS TO MULTIFAMILY PERMITS
Ratio of
Multifamily Change in New HH
Year Permits Households Households to MF Perm
- ---- ----------- ---------- ---------- ----------
80 2,836 458,914
81 1,807 464,701 5,787 3.20
82 1,091 470,561 5,860 5.37
83 3,981 476,494 5,934 1.49
84 3,490 482,503 6,009 1.72
85 5,714 488,587 6,084 1.06
86 4,784 494,748 6,161 1.29
87 4,558 500,987 6,239 1.37
88 2,794 507,304 6,317 2.26
89 2,311 513,701 6,397 2.77
90 3,223 520,179 6,478 2.01
91 2,118 524,775 4,596 2.17
92 1,301 529,412 4,637 3.56
93 1,628 534,090 4,678 2.87
94 1,817 538,809 4,719 2.60
95 1,232 543,570 4,761 3.86
96e 1,800 550,053 6,483 3.60
Source: Historical - U.S. Census Bureau, Calculations & Forecasts - Rosen
Consulting Group
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ALAMEDA COUNTY RATIO OF NEW HOUSEHOLDS TO MULTIFAMILY PERMITS
Ratio of
Multifamily Change in New HH
Year Permits Households Households to MF Perm
- ---- ----------- ---------- ---------- ----------
80 2,041 426,093
81 1,607 431,156 5,063 3.2
82 1,884 436,279 5,123 2.7
83 2,072 441,463 5,184 2.5
84 3,794 446,709 5,246 1.4
85 4,228 452,017 5,308 1.3
86 5,722 457,388 5,371 0.9
87 4,838 462,823 5,435 1.1
88 2,675 468,322 5,499 2.1
89 2,716 473,887 5,565 2.0
90 1,074 479,518 5,631 5.2
91 1,509 482,249 2,731 1.8
92 715 484,995 2,746 3.8
93 570 487,757 2,762 4.8
94 1,199 490,535 2,778 2.3
95 534 493,329 2,794 5.2
96e 276 498,436 5,107 18.5
Source: Historical - U.S. Census Bureau, Calculations & Forecasts - Rosen
Consulting Group
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San Francisco County Ratio of New Households to Multifamily Permits
Ratio of
Multifamily Change in New HH
Year Permits Households Households to MF Perm
- ---- ----------- ---------- ---------- ----------
80 942 298,956
81 1,043 299,612 656 0.63
82 1,065 300,270 658 0.62
83 1,058 300,929 659 0.62
84 904 301,590 661 0.73
85 1,217 302,252 662 0.54
86 1,898 302,915 664 0.35
87 2,287 303,580 665 0.29
88 1,774 304,247 666 0.38
89 1,361 304,915 668 0.49
90 916 305,584 669 0.73
91 792 307,151 1,567 1.98
92 559 308,726 1,575 2.82
93 919 310,309 1,583 1.72
94 841 311,901 1,591 1.89
95 409 313,500 1,599 3.91
96e 1,219 315,662 2,162 1.77
Sources: Historical - U.S. Census Bureau, Calculations & Forecasts - Rosen
Consulting Group
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SAN MATEO COUNTY RATIO OF NEW HOUSEHOLDS TO MULTIFAMILY PERMITS
Ratio of
Multifamily Change in New HH
Year Permits Households Households to MF Perm
- ---- ----------- ---------- ---------- ----------
80 1,096 225,201
81 353 226,819 1,618 4.58
82 599 228,449 1,630 2.72
83 429 330,090 1,641 3.83
84 1,178 231,743 1,653 1.40
85 872 233,408 1,665 1.91
86 2,144 235,085 1,677 0.78
87 1,708 236,774 1,689 0.99
88 981 238,475 1,701 1.73
89 1,335 240,188 1,713 1.28
90 191 241,914 1,726 9.03
91 331 243,365 1,451 4.39
92 596 243,365 0 0.00
93 89 243,365 0 0.00
94 301 243,365 0 0.00
95 623 249,259 5,894 9.46
96e 166 251,476 2,217 13.36
Sources: Historical - U.S. Census Bureau, Calculations & Forecasts -
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