World Series Pitting The City vs. Upstart
By MIKE MASON
Call it the new North-South rivalry.
As if San Francisco isn’t always having to pump itself up against Los Angeles, now it’s got Orange County to contend with.
The Angels-Giants World Series got under way this past weekend, and you’ve no doubt been hit with all the clich & #233;s: sunglasses vs. sushi, surfer-dude vs. city sophistication. Let’s leave those for the sports writers.
We’re here to talk a little business and how San Francisco and Orange County stack up. We’re looking at OC,not just Anaheim,as the Angels represent the county as much as their home city. San Francisco draws most of its fans from the city, but competes for attention with the Oakland A’s across the Bay Bridge.
Let’s start with team ownership, which offers contrasting styles: individual vs. corporate.
The Giants are run by an investment group headed by Peter Magowan, ex-chairman and chief executive of Safeway Inc. Magowan saved the franchise in 1992, when then-owner Bob Lurie had a deal to sell the team and move it to Tampa, before the grocery mogul moved in.
The Angels, of course, are owned by Mickey, er, Michael Eisner’s Walt Disney Co. Under pressure to shed money-losing divisions, Disney is shopping the team around.
How do the two regions stack up economically?
San Francisco and OC have more in common than you might think. They’ve certainly faced many of the same challenges recently.
Both regions rode the tech boom and have suffered its downturn, though OC less so than its World Series counterpart.
Everyone knows the story: Fueled by wildly optimistic growth forecasts, Silicon Valley gave birth to a San Francisco dot-com boom the size of a Barry Bonds blast to right field.
Dot-coms and other startups sprouted up in OC, too. Some of the Internet hopefuls still are kicking, though many have gone away.
In each region, the biggest companies are representative of their overall economies. OC, with a population of about 2.9 million, is home to six Fortune 500 companies: Ingram Micro Inc., PacifiCare Health Systems Inc., Fluor Corp., Fidelity National Financial Inc., First American Corp. and Pacific Mutual Holding Co., part of Pacific Life Insurance Co.
San Francisco, with 780,000 people, counts 10 big-league companies: ChevronTexaco Corp., McKesson Corp., Wells Fargo & Co., PG & E; Corp., Gap Inc., Providian Financial Corp., Charles Schwab Corp., Golden State Bancorp, Levi Strauss & Co. and Core-Mark International Inc.
Both areas depend on strong office markets. And both have plenty of “For Rent” signs out. The good news up north is that San Francisco vacancies fell slightly in the third quarter.
The bad news: vacancy still is 21.9% and was on a two-year losing string before the recent flattening. Overall office space in the city is about 75 million square feet, vs. 92.5 million in OC.
OC office numbers also have made commercial real estate players as nervous as David Eckstein in the on-deck circle.
Office vacancy soared when the tech downturn hit OC. In the third quarter, vacancy was 15.6%, up from 12.9% a year ago, but down from 15.8% in the first quarter. Lease rates have fallen to $25.20 per square foot per year, down from $26.88 last year.
In its heyday, San Francisco’s downtown office space was going for $80 to $100 per square foot. That’s fallen to the mid-$30s. It only takes a scooter ride through Potrero Hill, South of Market or along Kearney Street to see the extent of shuttered dot-com office space.
Housing? Good luck for the first-time buyer in either place.
At $370,000, the median-priced home in OC is affordable to just 23% of residents. A scant 14% of San Francisco dwellers can afford to buy at its median-home price of $527,320.
San Francisco’s median household income of $57,417 shades OC’s $56,624. But neither is too shabby,call it the well-to-do World Series.
In OC, people gripe about Mexican supermarkets in Anaheim, about the lack of a big airport, schools and affordable housing.
Think we have problems?
The San Francisco Business Times reported this month that a well-connected group has formed to battle that city’s “deteriorating business, civic and political climate.” Support comes from U.S. Senator Dianne Feinstein, Gap Chairman Don Fisher and residential developer Oz Erickson.
Troubling signs, according to one participant: “Hotels with high vacancy rates, the city’s dirty appearance, homelessness and low voter turnout.”
One clear difference: OC has no airport to rival SFO (though El Toro’s runways and tarmac size often are compared to San Francisco International Airport). Instead, OC is set to have a Great Park that will dwarf Golden Gate Park in size.
Tourism is down in both regions, a victim of the poor economy and terrorist attacks. But there are signs of a rebound.
San Francisco’s hotel occupancy was down 23% in January vs. a year earlier, but off just 6.7% by June. The OC market was down 12.7% in January, but only 7.3% in June.
San Francisco draws about 16 million visitors a year who spend $6 billion. OC attracts 41 million tourists, who spend $6.4 billion. While San Francisco draws travelers to tony hotels such as the Fairmont, many of OC’s visitors hole up in the motels around the Happiest Place on Earth.
Regardless of who takes the Series, OC stands to be a winner. After all, where will the triumphant players go? Disneyland, of course.
