Economic Outlook Forecasts Continued Growth in the East Bay
On May 29, the East Bay Economic Development Alliance sponsored a presentation by Christopher Thornberg of Beacon Economics on the 2014-15 Economic Outlook for the region. Dr. Thornberg described the local economy as “stable and healthy” as “businesses continue to increase employment and maintain productivity.”
Key points from the presentation included:
- Employment: The total number of workers employed at East Bay companies grew by 1.7% (17,000 jobs) over the past year. Fast growing sectors include Transportation and Warehousing, Real Estate and Wholesale Trade. Manufacturing employment increased by 2.4% in the East Bay, while the majority of the state’s metro areas saw manufacturing contract over the same period.
Beacon Economics is forecasting employment to grow by 1.7% in 2014.
- Consumer and Business Spending: Taxable sales in the East Bay grew by 8.1% over the past year. Autos and Transportation have seen the highest growth at just under 11%.
Beacon Economics is forecasting taxable spending to taper somewhat in 2014 with growth in the 4% to 5% range.
- Venture Capital: Venture funding decreased overall in the East Bay by 33% in 2012, although this is mostly reflective of a few very large deals in 2012. Venture capital nearly doubled for the Computers and Peripherals sector in 2013.
Due the presence of leading research institutions, the East Bay is forecast to remain a major player in venture funding in the future.
- Office Real Estate: Rental rates for office space grew slightly in 2013. Significantly, the East Bay continues to have dramatically more affordable office space than San Francisco ($26/sf vs $44/sf).
Dr. Thornberg predicted that this disparity will increasingly be driving business across the Bay to the East Bay in the coming years. Office tenants can save 40% by relocating from San Francisco to the East Bay and 18% by relocating from the South Bay.
- Housing: The median home price of an existing single-family home in Alameda County increased by 29% to $558,000 in 2013. Defaults and foreclosures have dropped dramatically and Dr. Thornberg noted that the foreclosure crisis is a thing of the past as an economic driver.
Although housing affordability in the East Bay is better than it has been in the past and better than in much of the Bay Area, it still poses a long-term economic threat. Businesses may be hesitant to locate in the area if they are not confident that their employees will be able to find housing. Dr. Thornberg stressed that significant expansion of the housing inventory will be needed over time.
Overall, the forecast was extremely positive. The East Bay remains a national leader in innovation and advanced manufacturing and is poised for sustained growth in the coming years.