FAIRFIELD-SUISUN, CALIFORNIA

Business-local

Trends in state, around town remain positive

Since our moniker is “Economic Notes,” we like to look every so often at economic trends affecting California and Fairfield. Intuition (our “crystal ball”) suggests that good times have arrived and will continue for quite a while, but sometimes it is useful to look at what the experts are saying.

Beacon Economics LLC is a research and consulting firm with expertise in economic analysis and forecasting, and they publish periodic updates on economic trends. The city has access to Beacon Economics’ expertise through HdL Companies, which provides more 380 cities, counties and special districts – including Fairfield – with economic research/analytical forecasts to help project revenues based on sales tax revenues and statewide data. In turn, Beacon Economics provides HdL with information on economic trends and data.

Key statewide trends that HdL and Beacon report include:

Autos/transportation: Statewide, the rebound in construction activity is boosting pickup and truck sales. However, new car inventories at dealerships have reached their highest levels since 2009 and manufactures are beginning to offer discounts and other incentives to entice customers onto dealer lots. Pent-up demand remains but the rate of sales growth is expected to be more moderate as we cross into the second half of the year. Locally, dealers in the Fairfield Auto Mall still project that their sales activity will remain strong throughout the foreseeable future.

Business/industry: Business and industry sales should experience a 4.0 percent statewide gain (not including the energy segment) moving into next year. The alternative energy project building “boom” that peaked a year ago has skewed growth comparisons for the business/industry group. A drop in federal subsidies available for these projects and fewer power purchasing agreements signed by major utilities will slow the pace of future energy development. Locally, however, residential solar panel installations have remained strong, as residents continue to pursue reducing long-term energy costs.

Food/drugs: Traditional supermarket chains continue to be the location of choice for most grocery purchases but consumers face an ever-growing number of shopping choices, from high-end and specialty grocers to drug stores, warehouse clubs and dollar stores. Growth in this segment will remain slow and steady.

Fuel/service stations: Domestic fuel consumption is declining. However, increased global demand for oil is putting upward pressure on gasoline prices. With the expectation of $4 per gallon prices through the summer travel season, a moderate uptick in sales receipts is anticipated in the near future. In Fairfield, new service station/convenience markets continued to receive approvals, particularly near Interstate 80. The city has also seen proposals for remodeling existing service stations to incorporate convenience markets.

General consumer goods: The demand for luxury goods appears to be peaking while the expiration of long-term unemployment benefits and cuts to food stamp programs have reduced lower-income and unemployed consumers’ purchases of discount and value-priced goods. Online shopping is trending up.

Restaurants/hotels: The health and wellness trend is shifting sales at traditional quick-service restaurants to fast casual operations with healthier alternatives that are also stealing sales from full-service dining chains. The lower prices and convenience of the fast casual boom has contributed to ongoing gains in this group. Domestic air travel and tourism have increased. Transient occupancy tax receipts (hotel tax) have also shown an increase in Fairfield. Locally, look for Pieology to enter the market, new restaurant(s) at the former Fresh Choice and new choices in the Solano Town Center mall food court.

California population growth: The California Department of Finance recently reported that population growth in California increased to an annual rate of 0.9 percent in 2013. Despite the fact that more than 100,000 former Californians left the state (net of new residents from other states), almost 170,000 new residents immigrated to California from other countries last year. Combined with more than 265,000 in natural population increases, the state’s population expanded by more than 332,000 last year to 38.2 million. Still, given the high cost of living and lower fertility rates among many segments of the population, 1 percent or lower population growth is forecast to remain in place for some time.

California median existing home prices: The median sales price of a home in California is higher than it was in 2013, although prices have remained level on a month-to-month basis since the latter half of 2013. Housing inventories have risen, but remain below five months of supply. Interest rates have remained fairly stable since June 2013 and are very low by historical standards, which will help encourage first-time and move-up buyers still sitting on the sidelines. Home prices are expected to continue to rise, but growth will return toward historical norms of 5 percent annually over the next two years. Local new home construction remains level, well above the levels of the Great Recession but below long-term counts. The city did see a brief spike last quarter in new home building permits due to new statewide building code requirements.

The data suggest the strong local and state retail economy will continue for the near future. We will not see a major boom, but sales and sales tax revenues should remain strong. Game changers may include new retailers entering the Fairfield market and absorbing the remaining mid-size and large retail spaces. Plans are percolating for the former Kmart space, the former Orchard Supply Hardware and the vacant Cost Plus World Market location at the Gateway Courtyard. We promise that we will keep you fully informed.

Economic Notes is an update from Fairfield City Hall written by Brian Miller and Karl Dumas of the Fairfield Planning and Development Department. Reach them at 428-7461 or email at [email protected] or [email protected]

Brian Miller and Karl Dumas

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  • DReaderJuly 27, 2014 - 4:05 pm

    "Plans are percolating for the former Kmart space, the former Orchard Supply Hardware and the vacant Cost Plus World Market location at the Gateway Courtyard" So what are the plans for the OfficeMax space? They're putting up their store closing signs today (Sunday).

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  • AaronAugust 28, 2014 - 11:07 pm

    I must say I find this hard to believe. All i see are tons of businesses opening in Vacaville but only closing in Fairfield. I think Fairfield is just too ghetto and no one wants to open their business in this kind of crowd.

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