Sacramento Employment Numbers Show Further Deterioration—Sit tight, no recovery in sight
A recent report by Sacramento Regional Research Institute points out that there are 12,600 fewer jobs in the six county Sacramento Area at the end of July 2008 than there were a year earlier. This means that there are 1.3% fewer jobs than there were last year. Actually, the report indicates that we have lost 14,000 private sector jobs and actually added 1,400 public sector jobs. This is the slowest employment growth in almost two decades. The declines were steeper as a percentage in Sacramento than in the Bay Area or California as a whole.
A recent report by Sacramento Regional Research Institute points out that there are 12,600 fewer jobs in the six county Sacramento Area at the end of July 2008 than there were a year earlier. This means that there are 1.3% fewer jobs than there were last year. Actually, the report indicates that we have lost 14,000 private sector jobs and actually added 1,400 public sector jobs. This is the slowest employment growth in almost two decades. The declines were steeper as a percentage in Sacramento than in the Bay Area or California as a whole.
The largest losses were in the following sectors: Construction (-6,100), Leisure and Hospitality (-3,000), Financial Activities (-2,800), Trade Transportation and Utilities (-2,700), Manufacturing (-2,100), Information (-400). Those sectors of the regional economy that added jobs included; Education and Health Services (+2,000), Government (+1,400), Professional and Business Services (+800), and Other Services (+300.)
Employment is a significant driver of commercial real estate. This underlying economic condition leads to reduced demand for office, warehouse, and retail spaces. In addition, these real job losses affect the overall economy, reduce earnings and spending, and contribute to a regional slowdown.
Things are pretty tough already in the regional economy but we are very concerned about the next stage of this slowdown. A recent Sacramento Bee article reports that the California legislature is still deadlocked on agreeing on a new budget—with a deficit of $16+ Billion dollars – it appears that the State is going to continue to reduce expenditures for the poor and needy-- and is likely to siphon off almost $3 billion dollars from County and City governments. That article of August 30, 2008 is entitled “It may all come down to a whole lot of borrowing – again” and you can find it at http://www.sacbee.com/111/story/1197429.html
Government employment at the state and local levels will have to slow or probably reverse. This will be felt in the California Capitol Region with greater impact than elsewhere in the State. What sector will step up and lead the recovery? A recovery will come…but when? Our guess is things will get worse before they get better.
Our advice for landlords of commercial real estate properties is that this is a time for making sure your current tenants are happy with the level of service and property management you are providing to them and to evaluate whether you can get an extension and renewal for your current tenants, and it is a time to get aggressive as it relates to “asking rents” and prices and concessions to attract new tenants.. We think being conservative and focusing on operating efficiencies and satisfied tenants is the thing to do now. It is time to sit tight and ride this through until the tide turns.
If you would like to discuss this blog post with us or if we can help you with a commercial or investment real estate transactions, please call or email us at Jim Gray (916) 617-4255 jgray@naibt.com or Nahz Anvary (916) 617-4257 nanvary@naibt.com. “Build on the power of our network” visit our website at http://www.naibtcommercial.com/
