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Booms Away!!!

Reviews by the Metro staff
Illustrations by Stephen DeCinzo

While bombs and bombers dominated the evening news, the Santa Clara Valley's explosion was economic But with so much fallout, can the party last another year?

No Vacancy

Wannabe renters found they needed a bit of an edge while looking for a place to live in Silicon Valley this past year: a neatly typed résumé, a complete rental history, a job profile and any credentials proving yuppie status; a paid listing from a rental-finder agency; lots and lots of time and money and blind luck.

For years Silicon Valley was a renters' market. High vacancy rates the prior year forced landlords to keep rents relatively low and even offer inducements to prospective tenants like waiving deposit fees. Not in 1996. To the glee of landlords, the job boom placed enormous pressure on the rental-housing market. Tracking services reported miniscule vacancy rates of one and two percent for most of the year.

At the same time, developers weren't building nearly enough multifamily housing to keep up with demand. Different housing surveys may have reported different numbers, but they all agree on one thing: rents are at all-time high levels. According to one national survey, the average rent in the San Jose metropolitan area soared to $1,441; other surveys pegged the median rent in the county around $920. High rents motivated college kids to put aside fears of looking like a geek and stay home with Mom and Dad.

Storage facilities were another beneficiary of the tight rental-housing market. In fact, perhaps the only task more frustrating than finding a rental was locating storage space to keep all the extra stuff that didn't fit in the new apartment. Some free advice for Silicon Valley renters who already have a place, but are thinking about moving elsewhere in the county: don't.

jetliner

Blow Out

ALL 230 PEOPLE ON BOARD a 747 jet died when TWA Flight 800 went down in flames in July off the coast of Long Island, so, to a blast-obsessed media and public, it just had to be a bomb. Or a missile. The TV guys were quick to air with theories, most of which had to do with the enemies of freedom terrorizing the land of the free. Must be Libyans, we thought, or Iraqis. Nope. While investigators are still not sure --this story won't end, either--the evidence now seems to point to mechanical failure, something in the central fuel tanks. Of course, this is not nearly as exciting as a bomb and, worse, it could play havoc with TWA's stock price. Much better a terrorist, no?

Lack of knowledge, however, didn't keep Pierre Salinger from acting stupid when he weighed in with "evidence" that the jet was downed by a U.S. Navy missile. That theory came via one of the black, helicopter conspiracy discussion groups on the Internet, but who knows? In an age of paranoia, everybody believes everything.
Lin Neumann

Real Life

Silicon Valley was one of the hottest real estate markets in the state this year. The experts called it a mini-boom. More homes sold in Santa Clara County in 1996 than in any other year during the '90s; this year's home sales topped last year's by almost 40 percent. Realtors cashed in on the so-called move-up market, made more attractive by reasonable interest rates hovering around eight percent. Many tenants, sick of looking for a place to rent, took the plunge into homeownership.

But the real cash-cow milked by real estate agents the endless stream of young execs, who struck it rich with stock options in high-tech firms and decided to buy nicer homes. An influx of new money poured into the upscale cities of Los Gatos, Saratoga and Palo Alto.

Although some quietly compared the most recent boom to the breathless '80s real estate market, there were tangible differences. While home prices went wild in some neighborhoods, overall they were static. According to the San Jose Real Estate Board, in September 1995 the median home sold for $230,000; in September 1996 the median home sold for $235,000--not exactly a windfall. Nevertheless, 1996 was considered a seller's market. Because of the area's low housing inventory and healthy economy, experts forecast another seller's market for 1997.

Cash Register

Silicon Valley high-tech industries offered Christmas shoppers no electronic equivalent of a Tickle Me Elmo this year, so PC sales are off last years' pace due to the aging Macintosh and Wintel platforms. Despite this, holiday shoppers are expected to plunk down $466 billion this season, the bulls are still running on Wall Street and shopkeepers are calling it the best year in a decade.

Nationwide, this year's holiday spending is expected to dwarf last year's dismal showing. Consumers say they'll spend about $764 on presents this year, 12 percent more than in 1995. Over Thanksgiving weekend, mall revenues were up 11 percent, says the International Council of Shopping Centers.

So where are all the computerbuyers? Retailers are having trouble selling PCs even with slashed prices and incentives like free monitors and delayed credit payments. But while computer sales are sluggish so far this holiday season, Silicon Valley is doing fine, thank you. The valley is proving it's more than chips and motherboards. Analysts say the tech industry is more diversified and therefore more resilient now. Medical laser manufacturers, Internet-related software makers, and computer networking companies are mainstays of the valley's economy now.

Ted Kaczynski

Blown Identity

In early April, of course, the poster boy for bombers everywhere may finally have been apprehended when Ted John Kaczynski was rousted from his Montana cabin and accused of being the dreaded Unabomber. Having read the manifesto last year, this year we put a face to the name and can now look forward to his megatrial in Sacramento, which means that maybe by this time next year we can stop talking about O.J. Simpson. The Unabomber trials seem certain to last for a long time, and Ted is poised to be a major celebrity into the next millennium, the most famous mathematician since Pythagoras. Look for a line of greeting cards, T-shirts, coffee mugs and calendars soon.
Lin Neumann

Boom Town

The Internet economy got a boost as the Northern California U.S. District Court struck down a 1993 ruling prohibiting distribution of encryption software over the Net. In 1993 the State Department won a ruling against David J. Bernstein's whose "Snuffle" encryption program it claimed violated the Arms Export Control Act. The feds have long held that they alone must create encryption standards so they can monitor Internet traffic. Encryption proponents argue that e-commerce will only take off when consumers are sure it's secure.

Also this month, China announced it had closed down four underground CD factories and nine production lines--a start toward putting teeth in international copyright law, which stands to boost the valley's computer-software industry.

Another good sign for Silicon Valley exports was the recommendation by 18 Pacific Rim nations that the World Trade Organization reduce or eliminate tariffs on high-tech hardware and software. Silicon Valley is still the target of about a quarter of the nation's venture capital. Experts predict Internet enterprises could drive a record-breaking year for venture capital in Silicon Valley in 1997.

Jobs and Jobs

Turns out Steve Jobs isn't the only one who got a new job in Silicon Valley this year. At 3.3 percent, unemployment is at its lowest rate in the valley since 1989. Santa Clara County added 30,000 jobs in 1996, including 5,500 in November alone, due in part to rampant hiring of seasonal workers.

Heading up the good-news hit parade is veteran valley giant Lockheed-Martin, which will hire 3,000 software, electrical and systems engineers over the next three years to staff its new $2 billion contract to build the U.S. Air Force's next generation of spy satellite. Imagine, thousands of job openings in one company. And Lockheed is not alone. Fast-growing startups are in vicious bidding wars over middle managers. Annual salaries and stock packages are the bargaining chips.

Richard Jewell

Oops

The Richard Jewell Show was as the final act of the Olympics that wouldn't end. This poor security- guard schmo calls in the bomb just before it blows up at Olympic Park and gets rewarded for his trouble when the FBI and the press label him as some kind of proto-militia lunatic out to destroy all that is good and decent in the world. As of year-end, the FBI, still totally clueless, has posted a $500,000 reward for information about the unsolved bombing and Jewell is a talk-show regular with a libel settlement in his pocket from NBC.
Lin Neumann

Taking Stock

Scrape one percent of the take off the top of the most profitable companies in Silicon Valley. That's what their top executives take home every year. But think of that as the view of an iceberg from the deck of the good ship Minnow and remember: two-thirds of an iceberg's volume lurks below the surface.

These days, executive salaries typically comprise about a third of their earnings, down from the two-thirds of years past. The rest of the dough these breadwinners bring home comes in the form of incentives and stock options. Exercising options on a good year has made some Silicon Valley execs very rich men (still very few women in this blessed group). Sincck options link executive salaries to the value of company stock, the sky's the limit. The biggest winner in 1995 was Frank Gill, vice president of Intel, who made $12.9 million cashing in on his options, throuwing his take-home salary well over $14 million. The top five executive salaries are 80 percent higher than they were 5 years ago.

In these boom times, a software engineer can make anywhere from the mid-50s to $80,000. Web site developers are making similar money. Senior engineers make $80,000 to $100,000, and vice presidents are solidly in six figures: $110,000 to $120.000. Even the lucrative options have trickled down to the contracts of these midlevel wage slaves as well. In the mad scramble for managers and senior engineers, startups use stock as an incentive to lure employees from the big boys, even if they can't quite compete on base salary. And speaking of trickle-down, that college student who schlepped you last latté may be in for a raise: the passage of Propositon 210 will pump up the minimum wage in California a whole dollar by 1998 from $4.75 to $5.75.

Gold Rush

A grassy field near the BFI dump along 880 Interstate in Milpitas advertises its availability for another 40-acre office park. The county is hastily moving to widen 880 and bring rail links to BART and over the Altamont Pass. Santa Clara County gained 10,000 new driver-residents from other states last year. The trip from San Francisco takes 20 to 30 minutes longer than a decade ago. The daily backup on 880 in Milpitas inspires commuters to bring along the morning paper.

Simultaneously, Washington-mandated welfare reforms will turn 25 percent of the 75,000 county residents receiving Aid to Families with Dependent Children into the job market. Can the boom at the top absorb these and other largely unskilled workers?

Ground zero of the jobs explosion is high-tech. This has spinoffs in the service, consumer and housing industries. So, the question is not whether there are jobs in Silicon Valley, but whether there are enough homes, highways and schools to support the influx.

Redevelopment Revival

Before 1996, the Redevelopment Agency of San Jose looked as if its best days were over. Falling property values and declining tax revenue threatened many projects in the agency's ambitious five-year building plan. San Jose's politicians, long dependent on redevelopment to satisfy their edifice complex, suggested raising taxes and borrowing money to keep pet projects alive.

But, as it turned out, none of that was necessary. The agency, thanks to an economic rebound, was able to continue work on major projects like the Repertory Theater and the Tech Museum. Buoyed by a surge in the city's industrial areas, assessed land values in redevelopment zones ballooned by $500 million in 1996--the largest growth since 1988. Its latest budget predicts an extra $43 million in bond proceeds over the next two years alone. (Underwriters, lawyers and consultants also benefited from the agency's renewed wealth, skimming more than $360,000 off the top of this year's $59 million bond issues.)

Redevelopment czar Frank Taylor's latest plan to rescue the downtown consists of pumping money into housing development --1,000 new apartments and condos over the next five years--and luring big corporations. Wonks and politicians hope to set off a chain reaction: more people living and working downtown will bring more dollars to retail outlets, including the agency's big bust, the Pavilion.

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From the Dec. 26, 1996 to Jan. 1, 1997 issue of Metro

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