West: Panning for Prosperity

Still suffering from soaring unemployment rates and a real estate nightmare, the West remains in the economic doldrums

Nonetheless, 53 percent of survey respondents reported first quarter 2011 eyewear sales were up from a year earlier. That's second only to the Southern region in terms of the number of practices reporting year-over-year increases.

ECONOMIC OVERVIEW

The West has sustained steady increases in the jobless rate since 2007, when unemployment was as low as 4.5 percent in April 2007, according to the Bureau of Labor Statistics (BLS). Tipping up to a decade high of 11.1 percent in April 2010, the West's jobless scenario has been the worst of any region.

On the brighter side, the West's unemployment rates slid to 10.9 percent and, subsequently, to 10.4 percent in April 2011.

Nevada has experienced the worst unemployment, with a 12.5 percent jobless rate in April 2011. Neighbor California has followed closely with 11.9 percent unemployment for the same period.

WANING CONFIDENCE

The West's residents have found little to be confident about. In May 2011, only 27.4 percent of consumers here said they were “confident” or “very confident” about the chances for a strong economy during the next six months, according to the BIGresearch Consumer Intentions & Actions Survey. This number is down from May 2010, when 32 percent of consumers felt the same.

Lensic Theater, Santa Fe, N.M.

Interestingly, only 3.4 percent of those Westerners surveyed were concerned with being laid off, a number that was down from 4.2 percent in May 2010, according to BIGresearch. Residents of the Northeast and Midwest were more concerned with being laid off even though their unemployment rates were lower overall.

SPENDING OUTLOOK

Are Westerners living in denial? Perhaps, as research indicates they have a more positive outlook than some other regions, even though they have a higher jobless rate.

When asked in May 2011 what specific changes they'd made in the last six months, 45.2 percent said they have become “more practical and realistic in their purchases” (up from 41.3 percent in May 2010), according to the BIGresearch Consumer Intentions & Actions Survey. A full 44.3 percent say they have also become more budget conscious in the past six months, and almost 32 percent say they plan to decrease their overall spending in the next three months.

Boulder, Colo.

COST OF GOODS

The West's Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) rose by three percent during the 12-month period from April 2010 to April 2011. This growth in inflation is similar to or slightly less than the increases seen in other U.S. regions.

RETAIL REAL ESTATE

The West's plethora of dense metro areas ensured that this region continued to see lower vacancy rates and higher asking rents, but this fact doesn't necessarily signal recovery.

“Some of the strongest markets in the country are still the ones you'd expect—Orange Country, San Francisco, San Jose, and Seattle. It has to do with the strength of the metro economy,” says Ryan Severino, a senior economist with Reis, Inc. “But, when you look at the data, this area is not really recovering.”

Seattle's Farmers Market

VACANCY RATES

Despite its unemployment woes, the West boasts one of the lowest vacancy rates in the country (only beat out by the Northeast)—a low 9.4 percent for the first quarter of 2011, according to Reis, Inc.

As for new construction, Severino says, “There is not enough demand to support the retail developments that have been built around formerly high-flying housing markets.”

RETAIL RENTS

Again, primarily because of its coastline packed with urban centers, the West is bolstered by the highest asking rent of any U.S. region.

For the first quarter of 2011, average rents rang in at $20.12 per square foot. This number was not significantly changed from the first quarter of 2010, according to Reis, Inc.

METRO MARKETS

While oversupplied metros like Las Vegas and Phoenix floundered in the turbulent economy, other urban hubs experienced growth.

CITIES TO WATCH

The Los Angeles market saw a meager 4.9 percent vacancy rate, which was down over the previous quarter, according to The CoStar Retail Report from the CoStar Group. It also experienced an increase in rental rates, up to $26.02 in the first quarter of 2011.

San Francisco continued to display extremely low vacancy rates—3.1 percent for the first quarter of 2011, according to CoStar.

This booming market also lays claim to one of the highest rental rates in the country—$30.73 PSF for the first quarter of 2011, an increase over the previous quarter.

FASHION TRENDS

The adventurous attitude of the West parlays seamlessly into the style directions of its consumers.

“The West in general, and California more specifically, will adapt the trends in their own unusual way,” says Roseanne Morrison, the fashion director at The Doneger Group. “For example, they might do more flowy fabrics, or sexy cutout backs on their long dresses under jackets,” she says.

FUR TRADER

One key fashion trend, the return to color for Fall, will be embraced by the open-minded fashion followers in the West. Colored fur in pieces such as lightweight knitted fur accents or fur vests has already been adopted by Westerners. “The West has seized that trend in a major way,” says Morrison. EB