View from Silicon Valley- "The economy and Silicon Valley"
(c) copyright View from Silicon Valley, 2005. All rights
reserved.
Grinding through the daily commute, you can listen to news
or music or a book or try to learn something with educational recordings. Tiring of second language efforts,
I happened to recently catch the local news radio station's daily report titled, "The economy and Silicon Valley."
The segment mostly highlights local Silicon Valley businesses
and is introduced with some nice studio sound effects to make sure you realize they think this is important. I started out thinking it would be a reasonable snapshot
for "How's business?" Unfortunately, there
seems to be a trend. See if you can pick out the common threads in the following:
Highlighted a few months ago, Fung Lum, a Chinese restaurant
in Campbell, announced they were closing. Based on the reports, it sounded like the family's next generation
chose high-tech over the restaurant business and the current owners are giving up.
It later emerged the owners want to convert their 1.67-acre site to 4,500 square feet of retail plus 45 condominiums(*). "Everybody" knows putting retail into
a development proposal makes the local municipality much more likely to approve it. (Sacramento gives
local governments back more local sales tax than property tax revenue, plus the locals have more freedom over how
to spend sales tax.) I applaud the owners for cashing in but give major demerits to the radio reporters for
implying we should feel sorry for the owners closing their business.
In two consecutive daily segments, a temp hiring agency
and then a marketing /promotions company used almost the same words, claiming they "feel" the local economy was going
to improve in 2005. In both cases, they cited no actual evidence except that they were "optimistic"
and "hopeful." They both expected to start seeing temp hiring and promotions budgets increased.
Last week, the focus was a moving company recovering
from the "dot bomb" crash. In recent months, the
moving company is moving people and their household goods, rather than businesses. The owner feels secure
this business is secure because most people are "moving up" into bigger houses.
The moving company's recovery is so strong that its headcount
is nearly back to the boom level. At the same
time, they see "hints" businesses are expanding and moving into larger quarters. In the very next breath, they observe rents are down. They gloated about how well
they are doing because they were able to move into three times their former space for about the same monthly rent.
(Does this explain the tiny, but persistent, net absorption of office space in Santa Clara County's monthly statistics?) I guess nobody but me sees any irony here?
A day or two later, there was an interview
with Lou's Village who may close down their restaurant, open in downtown San Jose since 1946. They claim
they are doing OK financially but the owner says the place is too big for him and his brother to manage. They lament
the next generation of the family is not interested in taking over. (They apparently forgot the 1996-era article
posted on their own web site implying they would never step aside for 3rd-generation family.) Almost as though
it was an unrelated item, at the end of the spot, the radio commentator pointed out the restaurant's land is part
of a 5-acre parcel being converted to housing.
The next day another real
estate company was trotted out reporting their retail properties are doing well and expected to improve further in 2005.
They also own apartments, however, and their rents continue to show zero recovery since the dot-com crash.
They admit rents continued to reside at 1998 levels, with hopes for maybe a slight increase this year if overall employment
improves.
Conclusion:Of
course, there is nothing wrong with business owners being optimistic. They are to be applauded for moving forward.
My issue is with how these stories all seem to have the same slant.
Each
of these businesses is dependent on housing and retail. They are all banking on an employment recovery-- which
none(!) of them have yet to see. That's the news item from where I sit.
How long can local housing and
retail be strong without high-tech job growth?
