Eric Von Berg - Newmark Realty Capital - 595 Market Street, Suite 2550, San Francisco, CA 94105 - for loan quote: 415 956 9922

November 7, 2011

2011 Bay Area Economic Engine:

Each year at this time I boil down the Bay Area business news into a summary organized by the Bay Area’s major industries and project their economic direction in the upcoming year. 

To download detailed chart click here!
Here's what I found:
In 2011 the San Francisco Bay Area continued its slow economic recovery with most sectors stable and some sectors booming. However the recovery is not even. Booming sectors are located in San Francisco, the Peninsula and Northern Silicon Valley. High-tech jobs account for 65% of the net increase in Bay Area jobs created this year, but high-tech is only 18% of the Bay Area economy. GDP for the San Jose, Santa Clara, Sunnyvale SMSA grew 13.4% in 2010, compared to the National average of 2.5%.

Silicon Valley’s 150 largest companies reported record profits in 2010 according to the Mercury News. These profits came with record productivity; $486,000 in sales per employee. Employment is up, but even in Silicon Valley and San Francisco, employment is not back to 2008 levels. 
The East Bay and North Bay are stable but lagging.  The East Bay and North Bay often benefit from a spillover effect when Silicon Valley’s and San Francisco’s rents soar.  This is happening in apartments and beginning to happen in the office sector as well.  

Any dark clouds?  Yes, two:
  1. Government employment and industries that receive government spending; education, defense, basic research and biotech. 
  2. The Financial sector:  The IPO sector needs to come back for funds to begin flowing again into the VC funds.  A second financial crises stemming from the Eurozone threatens the big banks.  Small banks are struggling with real estate loan write-downs but extend-and-pretend has helped them as cap rates compression causes values to recover.  
In a nutshell:
Assuming we can dodge another world-wide financial crisis, the Bay Area’s economic outlook for 2012 looks bright.