AMERICAN DEMOGRAPHICS 2015

WEST: A Shining STAR

“Consumer confidence is driven by what happens with employment, and we especially see confidence levels are above average in the West’s mountain region. The West is definitely doing above average.”

— LYNN FRANCO, director of economic indicators at The Conference Board, an independent business membership and research association

ECONOMIC OVERVIEW

Economic recovery is more tangible in the West than ever. Unemployment rates have dipped down to a seven-year low and retail real estate is experiencing some of the lowest vacancy rates and highest asking rents in the country. Thus, it comes as no surprise that consumer confidence is strong in this large region.

UNEMPLOYMENT RATE

The jobless rate has been on the decline in this sun-soaked region since it reached a 10-year high of 11% in March 2010. The West reported an unemployment rate of 5.8% in June 2015 compared to the U.S. rate of 5.3%, according to the Bureau of Labor Statistics (BLS).

But while the jobless rate has been on the decline in the West, it still remains the highest of any Census region in the country. Still, this region’s jobless numbers continue to move down year over year—from 8.0% in June 2013 to 6.7% in June 2014.

CONSUMER CONFIDENCE

Despite the West’s slightly higher unemployment rate than the rest of the U.S., residents here exhibit more of a sunny outlook about the economy than most other regions.

In the West’s Mountain region, consumer confidence is abloom—according to The Conference Board’s Consumer Confidence Index (CCI), Consumer Confidence here rose to 111.5 in May 2015, up notably from 92.7 in May 2014. This is an incredible increase over the region’s 58.7 CCI reported in May 2012. The countrywide CCI for the U.S. was 95.4 in May 2015.

In contrast, the CCI in the West’s Pacific region was reported somewhat lower, 95.7, in May 2015 (up from 83.0 in May 2014). Still, this region’s confidence is higher than the overall U.S. as a whole and clearly higher than other regions of the U.S., such as the Middle Atlantic (80.2).

COST OF GOODS

The West experienced a slight rise in cost of goods in June 2015—it was the only region in the U.S. to see an increase in inflation for the same time period. All other regions experienced a decrease in cost of goods.

According to the BLS, the Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) in the West region moved up by 1.1% from June 2014 to June 2015. This change signals a slight hint of inflation for the residents of this region.

RETAIL REAL ESTATE

The West lays claim to both the lowest vacancy rate and the highest asking rent of all regions in the country. This fact solidifies its position as a leader in the commercial real estate market.

“The West has growth in the tech areas—San Francisco, San Jose, Oakland—that you just don’t have elsewhere in the country,” says Ryan Severino, a senior economist with Reis, Inc., a leading provider of commercial real estate information.

“It’s the one industry that’s still knocking the cover off the ball,” Severino adds. “In Southern California, the entertainment industry also generates a lot of money that filters through to retail real estate. The West is overall the strongest part of the country,”

VACANCY RATES

The West region’s vacancy rate for retail real estate—the lowest in the country—continues to dip down, slowly but surely. The vacancy rate reported for the overall U.S. was 10.1% in the second quarter of 2015.

In comparison, the West region reported a commercial real estate vacancy rate of 8.5% in the second quarter of 2015 (down from 8.6% for the first quarter of 2014), according to Reis, Inc.

RENTS

The West’s retail real estate rents are also indicative of this region’s positive economic growth. Average asking rent rang in at a countrywide high of $24.30 for the second quarter of 2015 here. This number was slightly up from the asking rent of $23.64 reported in the first quarter of 2014, according to Reis, Inc.

By comparison, the West had a higher asking rent than that reported for the overall U.S., which was $19.89 for the second quarter of 2015.

TAKING IT Easy

Just about half (48%) of the Western respondents this year are hanging loose and keeping frame price points the same. Those changing included 28% who are moving to higher price points; 17% moving to both higher and lower priced products; and 7% are adding lower price points.

METRO MARKETS

The West’s major cities are riding high when it comes to asking rents, vacancy rates, and unemployment numbers.

At the same time, this region’s smaller metros are seeing slower growth.

CITIES TO WATCH

Northern California’s metros are the shining stars in the West. San Francisco boasted an impressive retail real estate vacancy rate of 3.5% for the second quarter of 2015, the lowest rate reported for a city in the entire U.S.

This urban center also demanded one of the highest asking rents—$35.09 per square foot in Q2 (up from $33.93 per square foot in Q2 of 2014), according to Reis, Inc. The city also laid claim to an impressively low unemployment rate of 3.3% in May 2015.

Not far behind, San Jose reported a low vacancy rate of 4.7% and an asking rent of $33.06 for the second quarter of 2015. The jobless rate was 4.1% here in May 2015.

A healthy economy is also evident further south in Orange County, where the vacancy rate dipped to 5.0% in Q2 of 2015 (down from 5.3% in Q2 of 2014) and the asking rent grew to $32.13 (up from $31.57 per square foot in the second quarter of 2014).

FASHION TRENDS

The West is known for its own, more colorful and casual, take on fashion.

“The West is definitely more experimental with colors—they have a little more fun,” says Roseanne Morrison, fashion director at The Doneger Group, a New York City-based trend and color forecasting service. “A key color group selling in the West and across the country is pastels—H&M is selling out of pale pinks, pale blues. Today, integrating a soft tone within the mix is a smart merchandising strategy for sure.“

This fall, the lush, opulent Arcade trend, pinpointed as a key style direction by The Doneger Group, will fall in step with Westerners’ more adventurous sense of style. This trend covers a flash of futurism, with specific style directions such as reflective surfaces, embroidered velvets, psychedelic prints, ornate decoration, and superhero inspiration.

WEST in focus

LENS MARKET

FREE-FORM: Western ECPs saw a 14% increase over last year in the percentage of free-form/digitally produced lenses they sold. And while that’s impressive, the region still falls into third place (in front of only the Northeast) in sales of these premium lenses. No reason to worry too much, however, as those numbers are only 3% below the national average.

LENS MATERIALS AND EXTRAS: Staying par with the rest of the county, 63% of ECPs in the West report polycarbonate as their most-used lens material. It’s a jump from last year’s percentage of 55, and is second only to the Northeast’s 65%. That pattern of coming in third among the regions behind the Northeast stays true regarding sales of plastic and Trivex material as well. Though plastic lenses took a slight (3%) fall here from last year, the sales of Trivex enjoyed a slight increase (2%). High-index lens sales remained fairly steady from last year, with sales numbers much lower than the other materials.

As for lens extras, folks in the West don’t get AR as much as their brethren in other parts of the U.S., but they understand the importance of managing light conditions. Only 75% of ECPs cited AR as their most-sold lens extra, the lowest percentage in the country. But at 21%, they sold more photochromics any other region by at least 9%. Tints, cited by 4% of ECPs as a most-sold extra, are the highest percentage here than anywhere else as well—and that’s a 4% jump over last year. Don’t get too full of yourself, West: your polarized numbers didn’t even register.

PRESBYOPES: Here again the West breaks away from the pack, with much more single vision lens sales than PAL sales. At 54%, the single vision sales here lead the nation, while the 41% of lens sales enjoyed by PALs is the lowest in the nation.

GOING DIGITAL: The West, like the Midwest, understands the importance of dealing with digital eye strain and blue light. A full 39% of ECPs says those lenses are the their fastest-growing specialty category, topping kids eyewear and sports eyewear, and beating the national average by 3 percentage points.

FRAME MATERIALS: A LOOK AT THE LATEST IN FRAME SALES AND TRENDS IN THE WEST

KEEPING COOL

Another year of the same news: there was a flat result in terms of buying new frames vs. refilling current frames for the West. That still keeps the region in second place for this category, with a respectable 93% opting for new. This allowed the Midwest to jump to the lead in this category for the first time in this study’s history.

ON THE EDGE: WEST REGION