State of the North Bay Economic Insight Conference

Last week, on October 23rd, over one hundred business and community leaders attended NBLC’s annual State of the North Bay virtual conference to hear a presentation of original research from Bay Area Council’s Economic Institute’s Executive Director, Jeff Bellasario.

Although the North Bay and the Bay Area are still trailing behind the nation and state in economic recovery, the North Bay’s economy remains relatively strong. That was the sentiment last week given the data presented.

Reporter Marc Albert, from NorCalPublic Media was on at the conference and agreed, reporting in an online article that “Offices are more occupied, airport passenger numbers are soaring and recent minimum wage increases, including for fast food workers, do not appear to be holding the region back. On the upside, Bellasario said a key marker of economic activity---road congestion and commuting....is illustrative.”

"Fewer people are taking transit, those office workers are not back, but the workers in the service sector, in construction, in manufacturing, the ones that maybe don't have a transit option or a remote work option, they are the ones that are coming back to work and really, we're looking almost back to where we were pre-pandemic in terms of traffic," Bellasario said.

“Data (from the economic report), also suggests tourism is recovering. While Sonoma County hotel occupancy is down 13 percent compared to before COVID, passenger traffic at Sonoma County's airport is up 62 percent. That's compared to double digits declines at San Francisco, Oakland and San Jose”, reported Albert.  People in general are just not coming to the Bay Area region overall and that is impacting the numbers in the North Bay. This is a key indicator to watch as we get back to full recovery.

Albert continues, “At the same time, there are headwinds. Bellasario said office vacancies in Santa Rosa hover around 10 percent. But that's better than many other Bay Area locales, where work-from-home is hurting more than just commercial landlords.”

“The downtown economies that are dependent on offices and office workers have really struggled to come back. And what that has meant is that we now have fewer restaurants and barber shops and gyms in those areas too that are not employing people because that 9-5 worker is just not there.”

“Bellasario said city and county officials need to re-envision downtowns to restore vitality. He expects it will take a decade for the office market to normalize, but that falling lease-rates could fuel a revival.”

“In one survey cited at the conference, 53 percent of respondents identified the region's affordability and housing prices as major challenges. That reality is fueling an outflow of young adults, Bellasario said, robbing the region of people launching careers and starting new households.” Population decline is a key concern in the North Bay. Where does the workforce come from if young families cannot afford to live here?

"Population is down significantly from where we were in 2015-2016," Bellasario added.

Bellasario “said that although that started with regional wildfires, the fact the trend is continuing presents a challenge. Economists regularly cite new household formation as a key economic driver.” Bellasario noted several growth sectors as possible opportunities for the North Bay including climate resilience and natural resources, biotech and manufacturing related jobs.  However, if young families are moving to other regions that are more affordable and offer a better quality of life, how we think about these jobs needs to change in the North Bay. We need to create housing policies, investments and partnerships to grow the workforce in these areas and create a talent pipeline.

The affordability issue is also leading the area’s demographics to trend older.  The median age in Marin is the oldest at 48, Sonoma County is 43.5 and Napa just below Sonoma at 43.4 compared with the statewide average of 37.

Santa Rosa's City Manager, Marakeshia Smith, who also presented at the conference, stressed the importance of understanding that housing is economic development. Business owners and residents in Santa Rosa prioritized housing and affordability in a recent survey conducted by Smith and her team as the most important issues for the future of the city.

“When we talk about economic development, we must talk about housing. Housing directly affects our local markets, our business vitality, consumer spending and tax burdens”, Smith said. She went on to say that “"When people cannot afford housing, attracting and retaining skilled workers, it becomes challenging. The City of Santa Rosa, we are working on zoning, we [have a] pro-housing designation, we have certified our housing element, but we have to continue to do more."

San Rafael City Manager, Cristine Alilovich noted nearly a billion dollars of development interest in the city was overwhelming. Much of the investment includes the redevelopment of a mall. “The Northgate Mall redevelopment is the largest residential project the County, not just the San Rafael city, but the County has ever seen.” 1300 units of housing are expected to come online in the next ten years, if the project is approved.

City of Napa Economic Development Director Neal Harrison agreed with the other presenters. Napa’s population is shrinking and getting older. This is a major concern and a challenge for the city. At the top of his presentation he stated, “we have challenges in workforce; people coming in to fill in, especially hospitality jobs. Housing affordability is huge.”

“While the out-migration of residents is starting to reverse, it will likely continue being an overall drag,” Bellasario, said.

"You are now on almost a ten-year trend of population decline, which for us is a pretty good proxy for the ability to grow economically, if you are not growing your workforce, you are not growing your population it's very tough to add jobs and add opportunities."