I'm Not the Only Pollyanna...

I've had a couple of people mention to me that my attitude has bordered on pollyanaish, regarding the current and forecasted state of the regional and national economy. My response has been:

1. The alternative is to whine and complain - which nobody listens to anyway.
2. I've actually seen a slight but consistent upward trend in our business - so I tend to ignore the doom and gloom headlines, and focus on the information instead.

Long segue into my post today - SF Chronicle's article Upbeat outlook on the economy, details the most recent Bay Area Confidence Survey, which shows 63% of local CEOs forecasting that the regional economy will "Get Better".

Courtesy of Bay Area Business Confidence Survey (Todd Trumbull/The Chronicle)

The article interviewed 5 local executives (including me), and we all were "cautiously optimistic" regarding the immediate future. Feels good to have some company in the Pollyanna corner!

ABI Continues to Climb

The Architectural Billings Index (ABI) has risen for the third month in a row, increasing to 48.4 from 46.1 (any score above 50 indicates an increase in billings). The ABI is a leading indicator of construction activity, reflecting an approximate 9 to 12 month lag time between architecture billings and construction spending.

By geographic region, the scoring averages were:

• Northeast (51.0)
• Midwest (49.2)
• South (46.5)
• West (44.7)

Lunch yesterday with a prominent SF based commercial builder, who confirmed that they are extremely busy responding to mulitple RFP's.

The challenge that he (and all of us in the commercial interiors industry), face right now, is that tenants have multiple options to look at regarding space - and they therefore want to see budgets and renderings for all of those options. Instead of creating budgets and plans for one or two options, we (the collective we) are being asked to create budgets and plans for three or four different options (all at no fee of course, and with no guarantee that we will get the job..)

Whining session over - it sure beats the alternative!

Calling all architects - SFMOMA to TRIPLE its size...

Attention architects - the SF Museum of Modern Art (SFMOMA) wants you. SFMOMA has issued an international call for architects, as it embarks on a $480 Million expansion project, which will result in the museum tripling its current gallery and public space.

The search will be overseen by a special committee, made up of museum and community leaders. The committee will be responsible for "short-listing" qualified firms, based on a proven ability to understand and meet the needs of an art museum as a civic resource, and a commitment to environmentally sustainable development. Ultimately the committee will make their recommendations to the museum Board of Trustees, who will make the final selection during the fall of 2010.

IPO activity trending higher...

Multiple positive indicators regarding the regional (Northern California) economy.

• Ernst & Young LLP released their 4th quarter 2009 IPO Pipeline report, showing IPO activity at a two-year record, meeting pre-recession levels. According to the report, 53 companies entered into registration, 30 IPOs launched, and the overall pipeline increased to 54 registrants. "California had the highest level of activity...with 18 companies in registration". View the source document (HERE).
• Separately, Silicon Valley VC Steve Westly in an interview with Reuters, said he is seeing some "great quality of deals..." Westly went onto say that green technology "is not a bubble and is not going away...it has the potential to become one of the largest sectors". View the entire interview (HERE).

Combine the IPO door "opening", with the smoking bargains that VCs can drive right now, and I don't think it is too big of a leap to forecast green-tech/clean-tech as the current / next "growth" engine for the Bay Area.

SF Bay Area Economy Stabilizing...

The Association of Bay Area Governments (ABAG), called the economic bottom today (at least for Northern California). This "gutsy" call came during ABAG's 22nd annual Bay Area Economic Outlook Conference, with economists forecasting stabilization in 2010, with slight growth in 2011.

Published reports detail that ABAG is forecasting an additional 20,000 jobs lost in 2010, but a gain of 8,000 jobs in 2011. Income growth will be negligible in 2010, however is forecast to grow 2.5% in 2011. Finally, sales growth is forecast for a tepid 1.0% in 2010, increasing to 1.9% in 2011.

Ok, this forecast isn't setting the world on fire - but at this point 0 growth is better than negative growth.

Just the publicity the SF Bay Area needs!

The good news is that San Francisco's commercial real estate market was prominently mentioned in last week's Business Week cover story: Why This Real Estate Bust Is Different - the bad news is that the feature was about how bad things are.

333 Bush Street - Courtesy of Business Week

In the story, Business Week highlighted the 2007 purchase of 333 Bush Street by Hines Development and another New York based investment fund. At the time, Hines paid the equivalent of $518 a square foot for the property. This was of course before the implosion and eventual bankruptcy of Heller Ehrman, the buildings primary tenant. According to the story, "the building's owners did not make a recent loan payment, and the lender is expected to begin foreclosure proceedings." Ouch...

Two Signs Growth Might Be Closer...

Thankfully the month of August 2009 is over. It will go down as one of the worst sales months in the history of my company. To say that it was "slow", harkens to the movie Apollo 13, when Tom Hank's character says "Houston, we have problem..." (a slight understatement). The best thing about a bad month is that it always ends, and a new month always begins.

With no where to go but up, I'm seeing small signs (both nationally and locally), that may indicate the worst is over.

Sign # 1: - Chicago Purchasing Manager's Index (which records regional manufacturing activity) surprised economists with a better than expected result for August of 50.0. (A result of 50.0 or greater is the threshold for indicated economic growth, below 50.0 indicates economic contraction. The result in July was 43.4).

Chart Courtesy of RTT News - Click Above For Source Article

When there seems to be no limit to how bad things can get, zero growth (or in this case no contraction) is growth.

Sign #2: - One of my clients who is dependent on venture funding for their planned expansion called with an immediate requirement for an East Coast office, and also released us to start planning for a local (year-end) requirement. This client had been "on-hold" for nearly 8 months awaiting funding, and it appears that this funding has now been secured.

Like the Purchasing Manager's Index, a single client finding funding doesn't make a trend, BUT - given that we have gone almost two full quarters with no good news, I'm taking these "blips" as a sign of things to come!

At Least Some Companies Are Growing!

Fortune Magazine has published it's 100 Fastest Growing Companies 2009 list, and California is home to 15% of the winners.

Courtesy of Fortune.com - Click Above for Source Document

Specifically the San Francisco Bay Area has 8 winners in our midst, with Sigma Designs of Milpitas ranking #2. (Click Here to see the California winners).

Which Way Is Up? Bay Area Economy Still Struggling

Proverb said: "It's always darkest before the dawn..." I hope that is true, because it's pretty dark right now!

May 2009 Economic numbers for the San Francisco East Bay Area tell a gruesome tale of woe with unemployment rising to 10.4% (up 85% from the estimate of 5.6% last May). California's unadjusted unemployment rate is 11.2%.

In a glimmer of positive news, the East Bay actually gained 600 payroll jobs between April and May of 2009 (I'm trying to remain positive!).

The gains came in Leisure, Hospitality and Trade, and in Transportation and Utilities (not usually seen as a hotbed of activity for architectural, interior design, or office furniture projects). Unfortunately these gains offset losses in Construction, Manufacturing, Business Services, and Government, typically buyers of architectural and interior design services, and office furniture products (ouch!).

No shocker that the dollar value of commercial building permits throughout the San Francisco Bay Area fell dramatically when comparing the period of (June 2007 - May 2008) to (June 2008 - May 2009) East Bay: -42.6 % and San Francisco: -55.5%.

This posting is going to end on some good news - the New York Times this morning reported a sharp rise in home sales (click HERE to read the full article), and the stock price of most publicly traded office furniture manufacturers continues to rise (indicating that at least today, Wall Street sees a future in industry).

Yet Another Tough Commercial Real Estate Moment in the S.F. Bay Area

In yet another sign of the challenging San Francisco Bay Area Commercial Real Estate Market, three buildings in the illustrious Watergate Towers building complex in Emeryville appears to be going into foreclosure.



According to a story in the Contra Costa Times, 1900 Powell Street, 2000 Powell Street, and 2100 Powell Street are in default. For those of us in and around the East Bay and San Francisco, Watergate is a marquee address with beautiful views of San Francisco and the Bay.

One more time, the relevance of this subject to Sam Clar, CSG, and other providers in the commercial interiors industry is the opportunity for a new owner to re-set rents to the current "lower" market rate, which will encourage prospective tenants to move, which in turn creates new project opportunites for industry providers. Painful but necessary transitions taking place.

Searching for Good News...

In an effort to find the silver lining in the current environment, here is something close to good news:

From CNBC "Stocks Log Best Quarter in a Decade" -

From the New York Times: "S.&P. 500 Stays on Track for a Strong Quarter"

And finally something a bit more local - from the East Bay Economic Development Alliance

THE EAST BAY IN APRIL 2009

> Median home values increased over previous month, continued to post year-over-year declines
>Unemployment fell to 10.1 percent, and job losses slowed compared to previous months

For the full report click (here).

Not all good news, but I'm determine to overlook the current consensus of pessimism and push forward into bluesky!

The Real Sam Clar

Indulge me a bit on this one...

My staff and I are always asked "where did the name Sam Clar Office Furniture come from?". So I thought I would take this posting to give the "official" background:

Sam Clar was my Great-Grandfather (my Grandmother's Father). Sam was one of 11 brothers and sisters, and was originally born in Denver Colorado. He moved out west in the early part of the 20th century, ultimately settling in the East Bay Area (Oakland) in the late twenties or early thirties.

To the best of our knowledge, Sam started the business (originally as an equipment and office machine seller) in 1939. He ran the business until 1973 at which time it was purchased by my Father (Jeff Schwartz). My Father retired from day-to-day operations in 1996 at which point "the torch was passed" to me.

Sam Clar and his Great-Grandson John Schwartz in 1972

Sam passed away in 1984, and I was fortunate to have been old enough to know him. He was a charismatic man who spent a lot of his time working with different community organizations and charities in the East Bay. Not a day goes by when my staff and I don't think about the "legacy" we have behind us.

Thanks for your indulgence on this nostalgic post...