September 6, 2007

Economic indicators reveal San Jose facing positive growth

In its recently released quarterly Economic Indicators Report, San Jose, America’s 10th largest city, revealed a significant growth in new Asian residents and an historically low 3 percent rental vacancy rate.

Developed by the San Jose Office of Economic Development, the report is a snapshot of key economic base statistics, including population growth and change and San Jose national rankings. Other findings include continued strong job growth with the addition of more than 60,000 jobs (San Jose MSA) since 2003. These job gains were reflected throughout different sectors, including education and health services, computer and communications hardware and innovation services.

The findings, according to Mayor Chuck Reed, demonstrate that the city’s and the region’s innovation and entrepreneurial spirit are helping fuel a regional renaissance. 

“San Jose is creating a vibrant city center, investing in neighborhoods and housing, and encouraging companies to locate and grow here.  The positive findings from the most recent Economic Indicators Report prove that we are developing an environment that helps fuel creativity and opportunity,” Reed said.

The return of jobs to San Jose is reflected in the lower commercial vacancy rates. In the second quarter of 2007, manufacturing and industrial vacancy levels hit 2.9 percent, compared to 4.6 percent during the same period in 2006. Additionally, competition for office space is increasing as vacancy rates continue to decline from 13.3 percent in the second quarter of 2006 to 10.1 percent in the second quarter of 2007. San Jose also continues to see a steady decline in R&D vacancy rates—from 22.1 percent in the second quarter of 2006 to 20.5 percent in the same period in 2007.

The report also revealed a jump in hotel occupancy, from 59 percent in the second quarter of 2006 to 62 percent in the second quarter of 2007, and a rise in air passenger levels at Mineta International Airport, from 800,100 per month in the first quarter of 2007 to 937,000 per month in the second quarter of 2007.

“As a gateway to the Bay and the coast, San Jose’s central location makes us a gateway to business and leisure experiences for visitors from around the world. These figures show how our strategic geographic position—combined with business growth and signature events that drive visitors, such as the San Jose Grand Prix—helps provide further robustness to our economy,” said Paul Krutko, chief development officer for San Jose.

Diversity continues to play a large part in the overall population growth for San Jose. The San Jose Metro Area saw the largest influx of Asians of any region in the U.S. With more than 26,000 new residents, 17,000 locating to the area were of Asian descent, based upon the most recent U.S. Census data (2005-2006).

The San Jose Metro area with an Asian population of 556,000, ranks second to Los Angeles as having the highest concentration of Asians in the U.S. and also has the highest population of Asians of any city in San Francisco Bay Area. “We anticipated that our Asian population growth would remain steady as it has been in the past. But, this is not the case: it has grown significantly, even during the downturn. The latest report demonstrates how San Jose, as a large international city, continues to attract talent from all over the globe to drive advancements that change the world,” Krutko said.

The largest migration of new residents to San Jose came from San Francisco—with 9,900 people making the move in 2006.

The growth of jobs and the population has also had an impact on rental vacancy rates. For the first time since 2001, rental vacancy rates have fallen to 2.7 percent. The industry norm, reflective of a healthy rental market is typically 5 percent. “Demand for housing will continue to be a challenge as San Jose continues to rebound from the effects of the dot com years,” Krutko said.

The report also revealed how San Jose ranks in key growth and amenities categories:

Lowest retail vacancy in the U.S. (#2)

Leader in nanotechnology (#1)

A top five city for cleantech (#2)

On-time Bay area leader for flight departures and arrivals (#1)

Top 10 walking city (#8)’

The Economic Indicators Report is available for review at www.sjeconomy.com/publications/oedpubs/aug07.pdf.