News - April 7, 2010

Data shows how local business slowed

by Sean Howell

Employment was down in Menlo Park in 2009. So were sales-tax revenues, the amount of venture capital funds invested in local businesses, and office space occupancy rates.

Just about any way you measure it, in fact, business activity fell off from the previous year. That's according to the city's business development department, which recently put together a presentation on the issue for the City Council.

"Each person has their own charts or indicators that they think are telling, everyone is trying to read the tea leaves," David Johnson, the city's business development manager, said in an interview. "This is our local version of that."

The data in the city's PowerPoint presentation was drawn from numerous sources, including federal agencies, such as the Bureau of Labor Statistics; PricewaterhouseCoopers Money Tree Report for venture capital investing; and a survey by the city's business development department and information from Cornish & Carey for office vacancy rates.

According to the presentation, businesses citywide shed 864 jobs from the end of 2008 to October 2009, and the city's unemployment rate rose from 3.8 percent to 6.9 percent. Its office vacancy rate was the highest it had been since 2005, but wasn't as high as it had been in the years following the dot-com bust.

Venture capital investments in city businesses fell from $166 million in the third quarter of 2008 to a low of $49.5 million in the second quarter of 2009.

There were, however, a few bright spots in the PowerPoint presentation. Vacancies along Santa Cruz Avenue were only about 7 percent as of early this year, and only about 11 percent of El Camino Real properties were unoccupied, including "chronically vacant" buildings such as the abandoned car lots.

A DNA sequencing company with headquarters in Menlo Park, Pacific Biosciences, drew a $68 million investment from a venture capital fund in 2009. The firm plans to move into a 30,000-square-foot headquarters currently under construction in east Menlo Park.

Revenue from the city's hotel tax grew steadily quarter-by-quarter, as business improved at the recently opened Rosewood Sand Hill hotel.

Office vacancies were highest in the "light industrial" area east of U.S. 101, which is in the midst of a slow transition to support more "life sciences" and medical device companies. The city hopes to begin work soon on a master plan to enable several major property owners to redevelop their land.

The city is also in talks with several electric car manufacturers looking to open an assembly plant, according to Mr. Johnson, the business development manager.

He wasn't as hopeful about prospects for filling the vacant auto dealerships on El Camino Real. "The buildings are so dilapidated at this point, it would cost so much to rehabilitate them, that it's almost a non-starter," he said. Leases on those properties all expire by 2012, by which time the city hopes to have a long-term plan in place to allow them to be redeveloped.

While vacancies weren't widespread downtown, sales tax receipts from downtown businesses shrank from $261,000 in the second quarter of 2008 to $214,000 in the second quarter of 2009, according to Finance Director Carol Augustine.

Citywide, sales tax revenues in the third quarter of 2009 fell by $335,000 — about 20 percent — from the same quarter in 2008, a bigger percentage drop than the statewide decline.


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