Looking Into the Crystal Ball On Our Area In 2014

Posted in Business, Finance

Doctor Robert Eyler, economist and director of the Executive MBA program at Sonoma State University, discussed the current, and future, state of the local economy on January 28.  The event, “The Crystal Ball: Economic Outlook 2014,” hosted by Torrey Pines Bank, and held at Scott’s Seafood Restaurant in Oakland drew a packed room of local business owners and executives. Doctor Robert Eyler made a number of observations about the future of the local economy, including:

  • Both California and US economies show some signs of peaking in growth in 2014, including the rapid growth of the housing markets in 2013 starting to slow.  Lack of new business growth overall and consolidation, commercial real estate demand rising (back in single-digit vacancies), and interest rates starting to show upward pressure with natural cyclic movements.
  • Forecasts are solid for the US and California economies with no recession predicted through 2016 currently, interest rates expected to be 4.5% on 10-year Treasuries by 2015, and drought not anticipated in California in any models at this time.
  • He sited major, long-term challenges (through 2020) to the state, including the potential loss of innovation in this generation, the economic climate becoming less business-friendly, demographic shifts to higher cost of living and the issue of education gaps in the state. He also expressed short-term challenges for California in 2014 and questioned whether there would be another tech innovation bump,  as well as the impact of equity market cycles on state budgets.  Eyler also brought up the question as to whether sales tax initiatives could be funded exclusively by tourism and residents.
  •  In the Bay Area specifically, he cited continued economic growth of about 4% in 2014, with labor market and income growth producing jobs in services.   Eyler cited that the area’s current run of tech is slowing down with San Francisco and San Jose remaining innovation centers for the globe. He anticipates that residential real estate is likely to slow growth in 2014, with interest rates rising.  Commercial space vacancies will continue to slowly fill up, with about 107 million square feet of space currently in inventory and 15.5 percent vacancy and prices rising for space in Oakland and Pleasanton in particular.
  • Eyler suggested the key drivers spurring Bay area growth are ‘classic tech’ (and the evolution to media companies and mobile apps continuing to grow and starting to mature), life sciences (offering longer time frame for investors and longer path for jobs) and services (including logistics, marketing, professional services). .
  • Finally, he pointed to the local aging population continuing to rise and representing a shift in consumer and government services demand, as well as a potential lack of available workers for local positions.

Torrey Pines Bank’s Aventine Network Series pays homage to Aventine Hill, a strategic point for controlling trade and commerce on the river Tiber in ancient Rome. The series is an opportunity for local business leaders to meet and discuss strategies critical for winning in today’s complex and competitive markets.