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Thursday, Mar 28, 2024

Business Leaders Say They Expect Little Lasting Impact Because of 9/11

Business Leaders Say They Expect Little Lasting Impact Because of 9/11 Survey: Most businesses hurt by Sept. 11 attacks, but optimistic about future. By JACQUELINE FOX Staff Reporter A significant number of San Fernando Valley business leaders representing a wide range of industries say they were negatively impacted by the terrorist attacks of Sept. 11, according to the results of a recent survey. Most, however, say they expect the negative impact to be short-lived. The economy was already on the skids and most businesses were in cost-containment mode when the attacks occurred. So, not surprisingly, many also say the Valley’s economy as a whole took a turn for the worse in late 2001. According to the results of the first San Fernando Valley Leadership Survey, many are predicting a swift turnaround for their businesses and the Valley’s economy as a whole. However, the high degree of optimism reflected in the results seems to run contrary to the fact, for instance, that the Valley is experiencing its highest rate of unemployment since 1996. In addition, while some respondents believe the Valley’s large cadre of small to mid-sized businesses may help insulate the region from deep recession, many East Coast-based retailers and conglomerates with stores and offices here continue to suffer and are expected to see a bumpy first quarter. The first San Fernando Valley Leadership Survey, conducted by Cooper Communications Inc. of Woodland Hills, questioned more than 200 business leaders in the Valley about the impact of the Sept. 11 attacks. It found 67 percent of the respondents were impacted negatively. However, 66 percent said they did not anticipate any long-term fallout. The survey did not ask respondents to say why or how they had been impacted. While 72 percent of the respondents said they believe the already softened economy worsened since the attacks, 71 percent said they didn’t see the events of Sept. 11 having any long-term ramifications for the Valley economy as a whole. The responses were submitted just a few weeks after the attacks when the airlines and the travel industry were groping for financial life preservers and local economists were predicting long-term disaster for the Southern California tourism markets going into 2002. “I was really surprised to find that a large percentage of the participants said they viewed the impact in a short-term light,” said Martin Cooper, president of Cooper Communications. “But even beyond that, we conducted the survey in October and I was surprised, if that’s the right word, that people put it in the perspective of this is a short-term issue, considering we were just a few weeks out from the tragedies.” This was the first of several planned quarterly surveys by Cooper, which will spotlight economic issues affecting Valley businesses. Of the 58 respondents, 10 said they believed the impact of the attacks would have a long-term impact on the Valley’s economic engine and seven said they had “no opinion.” Participants were also asked if they anticipated any long-term negative impacts for the Valley stemming from the war in Afghanistan. Although the margin was narrower, 52 percent said they did not, compared to the 35 percent that said they did and the 13 percent with no opinion. According to Arthur Sweet, president of A & E; Development Co. Inc. in Sherman Oaks, although commercial leasing activity has tapered off for some of his competitors, his company has yet to see any significant changes. “Basically, commercial realty has a certain built-in insulating aspect to it, so it tends not to be a leading indicator, but a following indicator of economic problems,” said Sweet. Richard Leyner, a senior vice president with NAI Capital Commercial in Encino, said, despite the impact of terrorist attacks and the general downturn in the economy, low interest rates are fueling his industry’s strength. “They’re saying if I don’t buy now, I won’t be able to buy later on when the economy bounces back and interest rates are higher,” said Leyner. Respondents included educators, health care executives, real estate, finance and legal experts and the owners of small start-ups. With 58 responses, the return rate was 32 percent, significantly higher than typical survey return rates of about 1 percent, Cooper said. “The biggest shock to me was how many responses we got back,” he said. “To get a return rate of 32 percent of any survey is absolutely phenomenal.” The largest number of responses (17 percent) came from representatives of the commercial and industrial real estate sector. According to their responses, that industry claims to be among the least impacted by the attacks and the downturn in the economy. Despite the rosy outlook and predictions of a swift recovery, the survey results do not appear to reflect high unemployment rates and other factors affecting the Valley’s economy as a whole. While there is speculation that research and development in the aerospace and defense industries and high-tech contracts for communications systems will soar due to the prolonged war effort, other industries are limping away from 2001. The entertainment industry, for example, was already reeling from a de facto strike and a surplus of product when the attacks occurred and, although they are expected to begin beefing up production by the second quarter, layoffs and climbing production costs are exacting a toll on the industry. The hotel and tourism industries took deep hits as a result of airport closures following the attacks. Layoffs appear to have slowed since, but getting heads on beds remains a challenge. Finally, the lackluster holiday shopping season, according to one local economist, has put some big East Coast retailers with stores in the Valley on what he called a bankruptcy “watch list.” He added that many large conglomerates with offices in the Valley could face tougher times going into the new year as their New York counterparts continue to pick up the pieces. “There is a whole lot going on and we are in the camp that expects a recovery to start in the middle of next year, but it’s going to be a slow recovery,” said Jack Kyser, director of economic research and chief economist with the Los Angeles County Economic Development Corp. “We think that after all the dust settles after the first quarter, you are going to see some major retailers file for Chapter 11. And that will cause pain for mall owners if all of a sudden you have gaps in your storefronts. There will be continued unemployment and, of course, cuts in sales taxes.” The attacks spurred an outpouring of financial support from Valley residents and business owners alike. But donations to the Red Cross and Sept. 11 funds deprived many Valley-based non-profits, resulting in heavy losses and, in some cases, closures in the non-profit sector. “Things were bad before Sept. 11, but it just magnified it for us,” said Ronda Wilkin, who until Dec. 31 served as the director of the West Valley Jewish Community Center in West Hills. Wilkin said her organization saw a 20- to 30-percent reduction in membership since Sept. 11. The network of community centers was forced into a major restructuring program last month to stop the hemorrhaging of funds. As a result, her job has been eliminated and many of the after-school, pre-school and kindergarten programs at the centers, including the Valley Cities and the North Valley Jewish community centers, will be cut by June 30. “We went way down on our membership because our membership drive begins Sept. 1 and ends the following August,” Wilkin said. Cooper agreed that, among the survey respondents, Valley non-profits appeared to be most impacted by the terrorist attacks. “No question about it, non-profits will not recover as quickly as others and there is some great concern on our part here that, separate and aside from the economy, there is a funneling away from the Valley of those funds, and many will be affected,” he said.

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