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Recommendation to Accept an Update on Select Industry Groups from the Economic Development Strategic Plan
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To: Members of the Mayor’s Economic Development Advisory Panel
EXECUTIVE SUMMARY
In 2018, City Council adopted the Economic Development Strategic Plan (EDSP) to guide economic development in the City of Alameda (City) over the subsequent five to ten years. The background report for the EDSP includes an analysis of a series of targeted industry groups which form the basis of the business sectors identified for growth in the EDSP.
In this report, staff has updated the initial analysis of targeted industry groups to better understand how these groups are performing. Staff also conducted a more in-depth analysis of two industry groups which have experienced tremendous change in recent years: Eating and Drinking and Biotech/Alternative Energy.
BACKGROUND
The background report for the EDSP identified and evaluated a series of “targeted industry groups” in the City, including:
o Biotech/Alternative Energy
o Eating and Drinking
o High Tech Manufacturing
o Hospitality, Arts, Entertainment, and Recreation
o Maritime Industry and Recreation
o Media, Computer Technology, and Professional Services
o Specialty Food and Beverage Manufacturing
These targeted industry groups form the basis for the business sectors identified for growth in the EDSP. The final EDSP, as well as the background report, can be found at this link: <https://www.alamedaca.gov/Departments/Community-Development/Economic-Development/EDSP>.
DISCUSSION
Four years after the EDSP was adopted, and two years into the COVID-19 pandemic, the City has updated the initial analysis of targeted industry groups to see how these industries are performing. Figures 1a and 2a in Exhibit 1 show the initial analysis completed for the EDSP, and Figures 1b and 2b show the updated information.
Overall key findings are listed below.
• Since 2017, the Biotech/Alternative Energy and High Tech Manufacturing industry groups have experienced the greatest employment growth. The majority of this growth was in the Biotech/Alternative Energy industry group, which added 2,149 new employees to grow by 114 percent. New employment in this area was driven by growth of existing firms, as well as businesses drawn by new development and rehabilitation of the City’s business parks. High Tech Manufacturing added 178 new jobs, for 21 percent employment growth.
• From 2017-2021, Eating and Drinking, Hospitality, Arts, Entertainment, and Recreation, and Maritime Industry and Recreation experienced the greatest loss in employment. The majority of jobs lost were in Eating and Drinking (-882), followed by Maritime Industry and Recreation (-326) and Hospitality, Arts, Entertainment, and Recreation (-275). For both Eating and Drinking and Maritime Industry and Recreation, the job loss trend began prior to 2019, but appears to have been exacerbated by the pandemic. Job loss in Hospitality, Arts, Entertainment, and Recreation businesses is more closely aligned to the timing of the pandemic.
• Media, Computer Technology and Professional Services, and Eating and Drinking have added the greatest number of establishments since 2017. The Media, Computer Technology and Professional Services industry group added 47 new businesses, while 17 new Eating and Drinking establishments have opened in Alameda.
Staff conducted a more in-depth analysis of two targeted industry groups: Eating and Drinking and Biotech/Alternative Energy.
Eating and Drinking
The Eating and Drinking industry group has been heavily impacted by the pandemic. Restaurants and bars interviewed for the City’s COVID-19 Economic Recovery Plan (which can be accessed here: <https://www.alamedaca.gov/Departments/Community-Development/COVID-19-Economic-Recovery-Task-Force>) reported challenges including multiple “pivots” (shifting between closures, take-out dining, outdoor dining, and indoor dining), fluctuating public health requirements, labor shortages, increasing cost of goods and supply chain issues, and worker stress due to risk of COVID-19 and the burden of enforcing changing public health guidelines.
In addition to the updated analysis included in Figures 1b, 2b and 3 of Exhibit 1, staff also compared employment rates in the City to Alameda County (Figure 4), and evaluated changes in sales tax revenue (Figure 5). Staff also researched national restaurant industry trends and interviewed two local restaurant owners. Key findings are listed below. Unless otherwise noted, all data cited below can be found in Exhibit 1.
• Reductions in Eating and Drinking employment in Alameda are consistent with broader industry trends. From 2017 to 2021, Eating and Drinking employment in Alameda dropped by 26 percent. While significant, this loss is consistent - and even slightly less - than employment changes in Alameda County during that time, which decreased by 28 percent. This reflects an ongoing labor shortage in Alameda and across the country. In its 2022 State of the Industry report, the National Restaurant Association reported that seven in ten restaurant operators say they don’t have enough staff to support their current service demand. Local restaurant owners report similar staffing concerns, resulting in reduced service hours, changing business models (e.g. moving to counter service instead of table service), and increased use of technology, such as QR code menus.
• Other indicators suggest that the Eating and Drinking Industry group is beginning to recover from the pandemic. The number of eating and drinking establishments in Alameda increased by 17 from 2017 to 2021, with seven of those businesses opening after 2019. In addition, after a sharp decline at the start of the pandemic, restaurant sales tax revenues increased significantly (38 percent) from 2020 to 2021; 2021 restaurant sales tax revenues were only 8 percent below pre-pandemic (2019) levels.
• Local restaurant owners suggest that the rate of recovery is “slow but steady” and can vary by business. Local restaurant owners reported that they were optimistic about recovery in the long-term, but also noted that challenges remain, including the labor shortages, COVID-19 surges, supply chain issues, and increasing cost of goods. They also noted that increasing sales tax revenues may reflect, in part, price increases necessitated by the increasing cost of materials.
The City has continued to support Eating and Drinking establishments throughout the pandemic, including the following ongoing programs:
• The Commercial Streets Program, which established permitting and guidelines for parklets and large al fresco dining areas, including the closure of Alameda Avenue, and the Webster/Taylor parking lot.
• A cap on third-party delivery fee apps, in order to limit restaurant and consumer fees.
• Alameda Restaurant Week, which helps to promote Alameda restaurants and bars.
• Participation in the Restaurant and Bar Coalition, in order to better understand and respond to the concerns of these businesses.
• The Façade Grant program, which provides grants up to $15,000 to assist restaurants and other businesses in updating and improving their commercial facades.
In addition to this continued assistance, the City also implemented a number of programs in the early stages of the pandemic to assist restaurants and bars, including deferment of City fees, the provision of emergency assistance grants, and the Feed Alameda program, which paid Alameda restaurants to cook meals for our unhoused residents. A complete list of these programs is available on page 20 of the COVID-19 Economic Recovery Plan.
Biotech/Alternative Energy
The Biotech/Alternative Energy industry group - and particularly the Life Sciences subsector - has experienced tremendous growth over the last 5 years. A focus group completed for the COVID-19 Economic Recovery Plan suggested that office-based businesses, and particularly Life Science firms, were less impacted by the pandemic and that demand for these spaces in Alameda has remained high.
In addition to the updated analysis included in Figures 1b, 2b and 6 of Exhibit 1, staff also compared employment rates in the City to Alameda County (Figure 7), and evaluated venture capital investment in this industry group (Figure 8). Key findings are listed below. Unless otherwise noted, all data cited below can be found in Exhibit 1.
Growth in Alameda’s Biotech/Alternative Energy industry group is outpacing that of Alameda County. From 2017 to 2021, the number of Biotech/Alternative Energy businesses in Alameda doubled (15 to 30) and employment grew at least 114 percent, or by 2,149 jobs. Comparatively, the Biotech/Alternative Energy industry group in Alameda County grew just 33 percent during that time. These increases have been driven by growth in existing Alameda Biotech/Alternative Energy businesses, and well as new businesses drawn by new investment in Alameda’s business parks, including the Research Park at Marina Village and Harbor Bay.
Venture capital investment in Alameda is also on the rise. From 2018 to 2021, venture capital investment in Biotech/Alternative energy businesses in Alameda increased 627 percent, from $122 million to $889 million. This is consistent with national trends. According to Cushman and Wakefield’s Q1 2022 Life Sciences Update, the Life Sciences industry has experienced tremendous growth in both private equity and National Institutes of Health funding over the last two years, with a record $78 billion in funding in North America in 2021.
The City has been working closely with developers, property owners and Biotech/Alternative energy businesses to support this growth through our At Your Service program, which provides customized assistance with permitting, electrical needs, and other concerns. The City also provides support through collaborative marketing efforts and events such as industry mixers and commercial broker luncheons.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This report provides an update on the performance of the targeted industry groups identified in the Economic Development Strategic Plan process.
RECOMMENDATION
Accept an Update on Select Industry Groups from the Economic Development Strategic Plan.
Respectfully submitted,
Lois Butler, Economic Development and Community Services Manager
By,
Amanda Gehrke, Development Manager
Exhibit
1. Updated Industry Group Analysis