Section Title
Bob Shallit: Diamonds Amid the Gloom
Project progress, breakout moves seen despite downturn
By Bob Shallit - bshallit@sacbee.com
Last Updated 11:30 am PST Monday, December 31, 2007
Story appeared in BUSINESS section, Page D2
It's going to be a tough year for the Sacramento economy, with real estate prices slipping, retail sales slowing and state spending getting squeezed. But it won't be dull. Despite the unsettled times, our crystal ball for 2008 reveals a bunch of big projects moving forward and a handful of regional companies experiencing breakout years.
Here's our forecast for the Sacramento region's business developments in 2008:
On the real estate front, look for an accelerated rate of home foreclosures. We see banks taking back 12,000 homes in Sacramento County in 2008, up from about 7,000 this year. The silver lining: Beleaguered lenders will start discounting their repo'd homes, creating some opportunities for great deals.
The region's office vacancy rate will climb at least one percentage point. How could it not, with 1.5 million square feet of new space coming on the market and perhaps only half of it occupied by new tenants? One result: Office owners will offer even bigger incentives (think bonuses, trips and car leases) to commercial brokers landing new tenants.
This will be the year Greyhound agrees to move its downtown bus terminal to Richards Boulevard. Yes, we predicted the same for 2006 and 2007. Third time's a charm.
CalPERS and its development partner, CIM Group, will deliver a scaled-down proposal for the empty block at Third and Capitol Mall. Like John Saca's grandiose but failed plans for a condo tower at the same site, CIM's plans will include condos, a hotel and retail. But probably only 30 floors instead of Saca's 53.
Aside from the CalPERS proposal, there will be little talk of high-rise condos downtown. But a plucky local builder, D&S Development, will continue to bring to market innovative, smaller condo projects, like its Old Sac lofts.
A certain local money-management firm will gain global recognition through deals it strikes with several big-name investment banks.
The California Highway Patrol will – finally – sign a lease to consolidate offices and occupy more than 200,000 square feet of space in West Sacramento.
Believe it or not, there will be modest progress on K street's blighted western edge. The city will win a six-month-long legal case to wrest properties away from Moe Mohanna on K Street's 700 block. Then developer Joe Zeiden will commission construction drawings for a high-end retail project designed to transform the pedestrian mall.
We also anticipate progress on fixing up Downtown Plaza. City leaders – after some silly whining about all the top-shelf retail tenants in Roseville's Galleria mall – will provide incentives to Westfield Corp. to remodel the mall. (Note to city: Roseville has the demographics. You don't.)
Don't hold your breath on that proposal to build a new Kings arena at Cal Expo. Despite all the talk, we don't expect to see any progress on such a problematic site.
I
t'll be close, but we think the Citizen Hotel will open at 10th and J streets by year's end, setting a new standard for luxury lodging downtown. Look for additional proposals for downtown hotels.
Meantime, Bob Leach's Le Rivage hotel will open on the Sacramento riverfront a couple of miles south of the Tower Bridge. And it'll answer a few questions: Does this region attract enough well-heeled visitors to support rooms starting at $250 a night? And can hotel guests find their way to the somewhat obscure location? The answers: Yes and eventually.
Sacramento's berry queen, Shari Fitzpatrick, will continue to draw national attention. The high point: A 2008 appearance on Oprah Winfrey's TV talk show.
A monster year is ahead for SynapSense Corp., which makes a wireless sensor system used to regulate temperatures in computer data centers. Following a recent funding round, the Folsom company is poised to boost its client base to 200 and annual sales to $30 million next year.
Roseville's Pride Industries, one of the biggest U.S. employers of people with disabilities, will keep growing at an amazing clip. Revenues for the current fiscal year, ending June 30, are projected at $140 million. Don't be surprised to see that jump to $200 million the following year.
State budget cuts will weigh heavily on the regional economy. But one local sector – tech services – will continue to grow briskly. Among the continuing star performers: Visionary Integration Professionals of Folsom.
It will be a quiet year at Sac International Airport, following the recent arrival of many new domestic and international flights. Don't expect any announcements about direct service from Sactown to Paris or London. But we do anticipate one new route that's, well, almost sexy: ExpressJet's daily service to Fresno.
Companies serving only local customers will need to hunker down. But not those immersed in the global marketplace. Look for a record-setting year from almond processor Blue Diamond Growers, which exports to worldwide markets and is benefiting from the dollar's decline. Stellar years also will be recorded by NEC in Roseville and DST in El Dorado Hills.
It will be another tough year for startups, with venture funding remaining flat. One reason: When the economy slows, entrepreneurial folks at places like Intel and GenCorp grow cautious about branching out on their own.
Still, at least one local company will test the public markets with a stock offering. It could be Davis-based Agraquest.
Several local venture-backed companies will be acquired. One good bet is Granite Bay's Revionics Inc., a software-maker for the retail industry, that could command nearly $50 million.
British supermarket chain Tesco will make a big splash in the region, opening more than a dozen Fresh and Easy stores. The fallout? It'll siphon market share mostly from discounters like WinCo and Food 4 Less.