Commercial Real Estate Blog

Hewlett Packard announced that it will cut nearly 25,000 jobs over the next three years as it integrates Electronic Data Systems (EDS). Most of the job cuts will likely be from beyond Silicon Valley, but the jobs cuts still amount to nearly 8% of the combined companies workforce.

Prime Rate: 5.00%
30-Year Bond: 4.025%
10-Year Note: 3.398%
91-Day Bill: .0797%
Fed Funds: 2.00%
Libor (3-Mo.): 2.82%

In what is one of the most fantastic days in modern financial history, Lehman looks to be headed into bankruptcy as potential suitors Barclays and Bank of America have walked away. Meanwhile, Bank of America has reached an agreement to acquire Merrill Lynch.

These two moves likely won’t be the last as attention will likely next turn to Washington Mutual in the coming next week or two. Attracted to Washington Mutual’s strong and well-located branch network, it’s likely a suitor will be found to take over. My money is on JP Morgan Chase to do that deal.

Both Neiman Marcus and Bloomingdale’s have confirmed plans to open stores at Westfield Valley Fair in Santa Clara in 2011.

Bloomingdale’s will be constructing a three-level 150,000 square foot store and Neiman Marcus will be opening a two-level, 120,000 square foot store. Both are expected to open in time for the 2011 Christmas shopping season.

We previously discussed Valley Fair’s expansion plans last month. The Neiman Marcus announcement also comes shortly after the announcement of a 100,000 square foot store at Macerich’s Broadway Plaza project in Walnut Creek. You can read about our previous post on that topic here.

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Numbers today came out for the national unemployment rate, and it is no surprise that the numbers continue to rise. The national rate now stands at 6.1%, a five-year high. These numbers don’t tell us much about California and Silicon Valley, so the graph to the right and data below represent the trends for the state and Silicon Valley.

The EDD, doesn’t have a statistic for “Silicon Valley”, but the data they have available on the San Jose-Santa Clara-Sunnyvale Metropolitan Statistical Area (MSA) is sufficiently representative of Silicon Valley, particularly when you are working to contrast the numbers with commercial real estate as these three cities represent three of the larger office markets in Silicon Valley.

In Silicon Valley, the unemployment rate for July 2008 came in at 6.4%, up 30 basis points from June’s 6.1% number, and has been steadily climbing since late last year.

Some historical unemployment numbers for the month of July over the past several years are as follows.

2008 - 6.4%
2007 - 5.1%
2006 - 4.9%
2005 - 5.6%
2004 - 6.7%
2003 - 8.7%
2002 - 8.5%
2001 - 5.4%
2000 - 3.5%
1999 - 3.4%
1998 - 3.7%
1997 - 3.5%
1996 - 4.0%

Oakland Tribune is reporting a drop in air traffic in San Jose (SJC) and Oakland (OAK), and only a slight year-over-year increase at San Francisco (SFO). The detailed article is available to read here, but highlights are:

• Across all three airports, the number of daily departures is down roughly 7%
• Oakland Airport is down nearly 19% YoY
• San Jose Airport is down around 17% YoY
• San Francisco Airport is up around 3.5% YoY

Based on seasonal demand, it is likely that we will see a further degradation, on average, in air volumes through at least the second quarter of next year.

The UK chancellor responsible for economic matters in the UK has indicated that the current economic downturn in the UK is the worst the country has faced in 60 years. The article touching on details and other thoughts of Alistair Darling, the chancellor, can be read here in the Guardian.