WEST: Confidence Climbing
ECONOMIC OVERVIEW
The West region continues to show improvement on the jobless front, but its unemployment rate remains the highest of any region in the country. Interestingly, consumers are more confident about the economy here than in many other regions.
“The West region has the highest rates of unemployment, plus wage and salary growth has not been as strong as other parts of the U.S. [an increase of 1.5 percent from the first quarter of 2012 to 2013],” says Jack Kleinhenz, PhD, chief economist with the National Retail Federation. “Recovery has been slower in several Western states as the housing crisis was more severe. The Mountain states are actually seeing a stronger pace of growth than the Pacific states.”.
JOB LOSS
The West has seen a marked decline in its jobless rate over the past year, from 9.4 percent in April 2012 down to eight percent in April 2013, according to the Bureau of Labor Statistics (BLS). This decline is significant when compared with this behemoth region’s jobless rate of 11.1 percent in April 2010, which was a 10-year high.
Still, the West’s unemployment rates lag behind those of all the other regions and also the average for the U.S., which was 7.5 percent in April 2013.
GROWING CONFIDENCE
Apparently, the West’s consistent recovery is inspiring confidence in its residents. In May 2013, The Conference Board’s Consumer Confidence Index (CCI) in the West’s Mountain region climbed to 89.1 in May, compared with 58.7 in May 2012. The Mountain region’s current CCI is quite healthy, as compared to that of the overall U.S., which reported in at 76.2 (1985=100) in May 2013, up from 69.0 in April.
In the West’s Pacific region, consumer confidence was not quite as strong, likely a result of a slower rate of recovery. Here, the CCI was reported at 80.8 in May 2013, up from 74.0 in May 2012.
The Expectation Index was stronger here, coming in at 92.5 in May 2013. This is a bit higher than the overall U.S., which had an Expectations Index of 82.4 in May. The Expectations Index in the Mountain region was also notable, reporting in at 89.1 in May 2013.
COST OF GOODS
The West’s Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) tipped up by just 1.3 percent from April 2012 to April 2013, a fact that signals some relief on inflation for residents of this region. This increase was on par with the CPI change for the country’s other three Census regions.
RETAIL REAL ESTATE
With a recovery in vacancy and rental rates that is nearly on par with the affluent Northeast, the West remains a strong contender on the commercial real estate front.
“The two strongest regions are the Northeast and the West, and a lot of that has to do with the fact that they are coastal regions with a lot of people and not a lot of room to build,” says Ryan Severino, a senior economist with Reis, Inc., a leading provider of commercial real estate information. “There is such a concentration of affluent people here who go shopping that commercial real estate remains strong.”
| OPTICAL FILE |
LENS MARKET FREE-FORM. The West (along with the South) is meeting the national average in free-form lens sales, with ECPs here reporting the premium category now represents 35 percent of their total lens sales. This is good news for the region, as last year it ranked third in free-form market share. This year’s numbers represent a 5 percent increase in sales, and a full 14 percent increase over the past two years. PALs. Sales of progressive lenses are strongest in the West so far this year, enjoying a 5 percent increase over 2012 and 73 percent overall sales percentage. MATERIALS AND EXTRAS. Though it remains this region’s most-used premium lens material, poly stayed steady in sales from last year, with 48 percent of respondents noting it as their most-used premium material. The region saw gains in the popularity of Trivex and 1.67, mirroring national trends. The region now leads the nation in Trivex popularity. This year 1.6 index lenses ranks last here among all regions. On the other hand, the West has a healthy increase in number of ECPs ranking AR as their most-sold extra—75 percent, up from 69 percent last year. And though the West is experiencing a slight drop in photochromic sales this year, it is the only region to stay steady at its share of polarized sales. |
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| FRAME FOCUS |
MATERIALS. In a nation where plastic is moving up, it’s best in the West where 64 percent of frames sold by respondents are plastic. Metal, on the other hand, has dipped to 18 percent, while metal/plastic combo frames have a 10 percent share and rimless comprises 7 percent of sales. PURCHASE PATTERNS. Again leading the pack, the West logs in the most new eyewear with Rx refill, with 95 percent of respondents’ patients going for new frames, up from 81 percent last year. SECOND PAIRS. While the West shares the top spot for sunglasses as a second-pair purchase with the Midwest, the 70 percent figure represents a drop from the 2012 finding of 79 percent. The West also leads sales of computer eyewear with 17 percent of second pair sales and doubled casual frame sales from six percent in 2012 to 12 percent this year. PRICING. About half of respondents said their pricing strategy would remain the same for 2013. In the biggest move, 29 percent are expanding to include both higher- and lower-priced options. |
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| EDGING STATS |
The West comes in last in number of respondents who operate an in-house finishing lab (32 percent), even fewer than last year (41 percent). Of those that edge in-house, all reported doing at least as many or more jobs than last year. 16%…more than last year 0%…less than last year 17%…same as last year |
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| SPECIALTY EYEWEAR |
Kids’ eyewear is a growth category here, but sports eyewear slumped a bit. |
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| DID YOU KNOW |
Salt Lake City…Best place to start a business (Sunset Magazine) Boulder, CO…Fittest city in America (247wallst.com) Cheyenne, WY…Lowest taxes per family in U.S. (Gov’t Revenue Svs) San Jose, CA…America’s richest city (MSN.com) |
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VACANCY RATES
The West reported a commercial real estate vacancy rate of 9.1 percent for the first quarter of 2013, according to Reis, Inc. This number was just below the 9.3 percent reported in the first quarter of 2012 in the West and just slightly higher than the vacancy rate reported in the Northeast, which was 8.8 percent in the first quarter of 2013.
Though things are looking rosier in much of this region, some of the overdeveloped metro areas such as Phoenix and Las Vegas are continuing their struggle.
“The Southwest was hit pretty hard—specifically Phoenix and Las Vegas, which are the poster children for what not to do with your housing market,” says Severino. “It’s taking these metros longer to bounce back because of the housing situation.”
RENTS
Asking rents in the West are moving, albeit slowly, in the right direction. Reported as $23.30 in the first quarter of 2013, according to Reis, Inc., asking rents climbed up ever so slightly from the first quarter of 2012, when they were listed at $23.14 in the West.
These numbers are notably higher than the asking rents realized in the Northeast region. Asking rents ticked in at $20.54 in the first quarter of 2013 in the Northeast, which was up ever so slightly from the first quarter of 2012, when they were listed at $20.41.
METRO MARKETS
Some cities in the West struggled with sky-high vacancy rates, such as Colorado Springs (15.8 percent), Las Vegas (13 percent), Phoenix (11.4 percent), as well as Sacramento (12.4 percent). Still, other cities showed promising signs of recovery.
CITIES TO WATCH
In Northern California, the thriving metro of San Francisco boasted a noticeably low vacancy rate of 3.6 percent for the first quarter of 2013, according to Reis, Inc., with a rental rate of $32.99 per square foot.
In Silicon Valley, San Jose also reported a healthy vacancy rate of 5.9 percent for the same time period, along with a rental rate of $30.96. The vacancy rate was just slightly higher down the coast in The City of Angels—Los Angeles reported a declining vacancy rate of 6.1 percent and a rental rate of $29.32 per square foot.
Up north, Seattle also revealed a declining vacancy rate of 6.9 percent in the first quarter of 2013. It also pulled in increased rental rates of $23.01 per square foot for the same period, according to Reis, Inc.
FASHION TRENDS
While it is home to a plethora of fashion devotees, the West is known for adopting key trends but adapting them with their own fresh take.
For example, this fall, Westerners will embrace the classic, ladylike trend on their own terms. “The West is definitely more denim oriented and they will follow this trend but in more indigo-colored, layered looks,” says Roseanne Morrison, fashion director at The Doneger Group.
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