The URL can be used to link to this page

Home My WebLink AboutSS3 - Current Economic TrendsCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. SS 3 March 10, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Sharon Wood, Assistant City Manager 949 - 644 -3222, swood @city.newport - beach.ca.us SUBJECT: Current Economic Trends BACKGROUND: At the City Council meeting of January 27, 2009, Council Member Daigle requested information on trends that could be indicative of the health of the Newport Beach economy, including commercial vacancies, building permits, business license renewals and utility delinquencies Commercial Vacancies The City has a subscription with Costar Group for commercial real estate information. Citywide, the vacancy rate in all commercial buildings has increased from just under 5% in the second quarter of 2006 to approximately 8% in the first quarter of 2009 (Attachment 1). Looking at a longer term trend, current vacancy is lower than the highest point in the last nine years, which was 11% at the end of 2002 (Attachment 2). The high number of small commercial buildings in Newport Beach skews the citywide average downward, however. Information for Newport Center and the Airport Area shows higher vacancy rates, 10% and 15% of all commercial buildings in the first quarter of 2009, respectively (Attachments 3 and 4). Newport Center is currently just under its highest vacancy rate of approximately 11 % in 2001 -02, and the Airport Area is at its highest vacancy rate in the nine years for which we have data (Attachments 5 and 6). The smaller commercial areas (Balboa Peninsula, Balboa Island and Corona del Mar) have vacancy rates under 5 %, while Mariners' Mile is at about 6% vacancy at this time. Current Economic Trends March 10, 2009 Page 2 Buildina Permits The number of building permits issued has decreased steadily over the past few years: from 10,135 in 2005 -06 to 7,235 in 2006 -07 to 5,036 in 2007 -08. However, construction valuation has not followed the same trend. It reached a peak of $304 million in fiscal year 2005 -06, and has been down and up since then (Attachment 7). Revenue to the Building Department follows a pattern similar to construction valuation, because fees are related to the size and complexity of projects (Attachment 8). These data indicate that the number of construction projects has decreased over the past few years, but the projects underway are larger ones. Business License Activity A comparison of business license activity to last fiscal year is shown in Attachments 9 and 10. The number of new licenses issued is 85% higher this fiscal year to date than in 2007 -08, and year -to -date revenue from new licenses has increased 88% over last year. Business license renewals are 8% lower than last year, and revenue from renewals is 3% lower than last year. The Revenue Manager reports that business license inspection staff currently needs to do more field work than usual to ensure that businesses keep their licenses current. Utility Delinquencies Data on delinquent water payments for calendar years 2007 and 2008 show that delinquent payments increased by about 1 %, but shut -offs due to nonpayment decreased by 12 %. Economic Development Committee Discussions The Economic Development Committee (EDC) devoted two meetings late last year to reviewing economic conditions in Newport Beach. Each geographic and business area was asked to provide a short report on its economic health, and representatives from these areas provided the following anecdotal reports. The older commercial areas (Balboa Village, Cannery/Lido /McFadden, Balboa Island and Corona del Mar) reported that business was down by approximately 10 -15 %. Fashion Island had been hurt temporarily by the closure of one anchor store, but the opening of some new restaurants and stores in 2008 -2010 are good news for this retail area. Hotels were still doing well, in part because of group and convention business and visitors from the drive market. However, vacation rentals on Balboa Island were down by about 30 %. Restaurant business was down about 15 -20 %. The EDC then discussed what the City could or should do to help local businesses. Ideas included additional City participation in projects like the Balboa Theater and Nautical Museum, marketing hotels to the foreign market (which the Conference and I Current Economic Trends March 10, 2009 Page 3 Visitors Bureau is doing), allowing additional floor area in the Old Newport Boulevard area, Chamber of Commerce marketing of special sales or discount opportunities to its members, and relaxing the City's temporary banner regulations. EDC recommended that the City Council take action on the final item, and an ordinance increasing the time allowed for temporary banners was adopted in October 2008. Submitted by: Sharon Wood Assistant City Manager Attachments: 1. Citywide Commercial Vacancies by Quarter 2. Citywide Commercial Vacancies since 2000 3. Newport Center Commercial Vacancies by Quarter 4. Airport Area Center Commercial Vacancies by Quarter 5. Newport Center Commercial Vacancies since 2000 6. Airport Area Center Commercial Vacancies since 2000 7. Construction Activity 1993 -94 through 2008 -09 8. Building Department Revenue 1993 -94 through 2009 -10 9. Business License Count per Type 2007 -08 and 2008 -09 10. Business License Revenue per Type 2007 -08 and 2008 -09 Rates 9% 87. 7X 6% m T 4'. »> 3 2% Citywide Commercial Vacancies 1% 1,516,784 8% Total Avail: 2,269,376 12% Direct Avail: 1,849,379 10% Sublet Avail: 405,422 2% 0% 9.3 Months 2006 29 2006 3c IDX 4c 2UD7 '7 20_7 2: 2007 3= 2007 4q I'm& it M 2c 20M 34 20-DE k cur z"r — Direct Vet — Sublet Vac — Total Vac This copyrighted report conlains research licensed to City of Newport Beach - 417323. I (-") Attachment 1 occupancy Existing Bldgs: 957 of 969 # Spaces: 778 Existing RBA: 19,071,158 Vacant: <1,620,071> Occupied: 17,451,087 Leased: 17,745,483 availability 8% 92% 93% Vacant Avail: 1,516,784 8% Total Avail: 2,269,376 12% Direct Avail: 1,849,379 10% Sublet Avail: 405,422 2% Average Time: 9.3 Months leasing activity Leasing YTD: 109,504 1% Net Absorp YTD: (79,388) (0 %) direct gross rent Office range. $7.68- $80.65 /yr Office Avg: $35.60 1yr 211112009 Vacancy Rates i li c C v 1 `l •c -: I 2% o% Citywide Commercial Vacancies 2L .� 13 C4 05 Direct Vac — Sublet Vac — Total Vac Attachment 2 occupancy 1,516,784 Existing Bldgs: 957 of 969 # Spaces: 778 Existing RBA: 19,071,158 Vacant: <1,620,071> 8% Occupied: 17,451,087 92% Leased: 17,745,483 93% availability Vacant Avail: 1,516,784 8% Total Avail: 2,269,376 12% Direct Avail: 1,849,379 10% Sublet Avail: 405,422 2% Average Time: 9.3 Months leasing activity — — Leasing YTD: 109,504 1% Net Absorp YTD: (79,388) (0 %) - direct gross rent Office range: $7.68•$80.65/yr Office Avg: $35.60 /yr This copyrighted report contains research licensed to City of Newport Beach - 417323. 2111/2009 Vacancy Rates 11•% lox 9% 8•% 7% m 6% U C Sti 4% 3 2 2009 2G Newport Center Commercial Vacancies 2cos 2006 2007 1007 2007 X,07 2M 34 4c '.a 20 3a 4� ,a Direct Vac — Sublet Vac — Total Vac 2008 21" 2008 Cyr 2a 3a 4g This copyrighted report contains research licensed to City of Newport Beach - 417323. occupancy Existing Bldgs: # Spaces: Existing RBA: Vacant: Occupied: Leased: availability Vacant Avail: Total Avail: Direct Avail: Sublet Avail: Average Time: leasing activity Leasing YTD: Net Absorp YTD: direct gross rent Office range: Office Avg: Attachment 3 82 of 82 160 3,807,276 <383,143> 10% 3,424,133 90% 3,493,392 92% 357,377 9% 500,617 13% 421,626 11% 78,991 2% 9.1 Months 10,202 0% (25,543) (1 %) $30.00- $63.95/yr $48.40/yr 2/11/2009 Airport Area Commercial Vacancies Vacancy Rates V c U N 4% 2% 0% 2DD6 2006 M 21J07 2017 2D D7 2007 2'7514 M 2008 - 2p 3p 40 14 2G 3a 4Z 14 2G 3: _. Direct Vac — Sublet Vac — Total Vac This copyrighted report contains research licensed to City of Newport Beach - 417323. Attachment 4 occupancy 866,275 Existing Bldgs: 193 of 198 # Spaces: 381 Existing RBA: 6,218,396 Vacant: <939,220> 15% Occupied: 5,279,176 85% Leased: 5,478,994 88% availability Vacant Avail: 866,275 14% Total Avail. 1,219,073 20% Direct Avail: 932,500 15°% Sublet Avail: 273,398 4% Average Time: 10.2 Months leasing activity Leasing YTD: 87,362 1% Net Absorp YTD: (17,227) (0 %) direct gross rent Office range: $18.60 - $50.58 /yr Office Avg: $29.48 /yr 2/1112009 Newport Center Vacancies Vacancy Rates This copyrighted report contains research licensed to city of Newport Beach - 417323. I Attachment 5 occupancy Existing Bldgs: 82 of 82 # Spaces: 160 Existing RBA: 3,807,276 Vacant: <383,143> 10% Occupied: 3,424,133 90% Leased: 3,493,392 92% availability Vacant Avail: 357,377 9% Total Avail: 500,617 13% Direct Avail: 421,626 11% Sublet Avail: 78,991 2% Average Time: 9.1 Months leasing activity Leasing YTD: 10,202 0% Net Absorp YTD: (25,543) (1 %) direct gross rent Office range: $30.00- $63.95 /yr Office Avg: $48.40/yr 2111(2009 Vacancy Rates a, C n U U i Airport Area Commercial Vacancies Direct Vac Sublet Vac — Total Vac This copyrighted report contains research licensed to City of Newport Beach - 417323. Attachment 6 occupancy Existing Bldgs: 193 of 198 # Spaces: 381 Existing RBA: 6,218,396 Vacant: <939,220> 15% Occupied: 5,279,176 85% Leased: 5,478,994 88 %, availability Vacant Avail: 866,275 14% Total Avail: 1,219,073 20% Direct Avail: 932,500 15% Sublet Avail: 273,398 4% Average Time: 10.2 Months leasing activity Leasing YTD: 87,362 1% Net Absorp YTD: (17,227) (0° %) direct gross rent Office range: $18.60- $50.58/yr Office Avg: $29.481yr 2/1112009 $350 $300 $250 c 0$200 o g =" 150 c R100 O +� U �v $50 $0 Attachment 7 Construction Activity 93- 94- 95- 96- 97- 98- 99- 94 95 96 97 98 99 00 00- 01- 02- 02 03 Fiscal Years 03- 04- 05- 06- 07- 04 05 06 07 08 08- 09" 'Estimated $5.000 $4,500 $4,000 $ 3.500 Q� _ $3,000 aN $2,500 $2,000 ro $1,500 0.- $1,000 $500 Building Department Revenue Attachment 8 $o 93- 94- 95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 05- 06- 07- 08- 09- 94 95 96 97 98 99 00 02 04 05 06 07 08 09' 10" �iscal bears *Estimated * *Projected Attachment 9 Business License Count per Type 3000 2607 2500 2376 -� OS 2000 1801 1683 1720 1688 1627 1524 1607 15 97 1574 ■ 2007 -2008 New 1500 ■ 2008 -2009 New 1334 13 r 2007 -2008 Renewal 17 12 36 1217 ■ 2008 -2009 Renewal 1000 500 328 ` 25 19 27 24 20 30 23 243 2;2 261 17 13 10 10 12 10 9 0 7 8 9 10 11 12 1 2 3 4 5 6 $500,000.00 $450,000.00 $400,000.00 $350,000.00 $300,000.00 $250,000.00 $200,000.00 $150,000.00 $100,000.00 $50,000.00 5- Business license Revenue per Type 7 8 9 10 11 12 1 2 3 4 5 6 9 Attachment 10 ■ 2007 -2008 New ■ 2008 -2009 New ■ 2007 -2008 Renewal ■ 2008 -2009 Renewal