Search the Internet          Tips

The Dotcom Domino Effect: Non-tech Sector Feels the Pinch

Kavita D Sajwal

The slowdown in the US tech industry has now started affecting non-tech Indian businesses in the country.

Indian real estate agents, travel agencies, grocery stores, movie halls, they're all feeling the pinch.

And they point out that even though software professionals are getting pink slips, the advantage of being on H1b visa status is that the company firing you has to pay the expense of returning to your native country.

Grocery stores are reportedly facing around 20 per cent to 30 per cent decline in the business over the past two months. "We are scared about the future and so is our existing customer base. Now we are thinking of taking a very serious look at our purchases as it might lead to inventory pile up if left unattended," says Rajan Choudhary of India Spice House, located in the Bay Area.

Other stores in the Bay Area echo these fears. "Our business is slowing down day by day. Since the last one month we have witnessed a steep fall in our sales. Almost every second day we come across one or two of our regular customers saying that they are packing their bags for India," says owner of a San Jose-based Indian grocery store who requested anonymity.

Travel agents have witnessed 5 percent to 10 percent loss in business in the past six weeks.

"The main business comes from the H1 transit. On average software professional visits India every two years with his wife and kids. Also, they sponsor the visit of their parents and relatives. With the H1-B count going down our business will take a hit in coming few months, though it might not happen immediately," says Sunny Refai of Fremont-based United Tours & Travels.

Similar sentiments are expressed by other businesses like liquor stores, beauticians and niche businesses catering to the Indian community.

But Indians plying taxis or other low-salaried jobholders are sort of happy with the exodus of the software professionals from the Bay Area. They feel the cost of living will come down.

A taxi driver, who seems to be very relaxed about it shares his feelings, "It is good for us as we have been struggling to live in the Bay Area after the software boom. The apartment rents shot up and went beyond the reach of a common man. We do not earn as much as software engineers. Hence, it has been very difficult for us to make our ends meet."

The Silicon Valley vacancy rate has risen after the dotcom debacle. Just three months ago it was a real task to find an apartment. Almost every apartment complex had two-three months waiting. The usual banners outside the apartment complexes were 'We are renting'.

Now, these banners say: 'Ready to be occupied'. Not only this, the rents have also been slashed on an average by $100 to $300. This is a good sign for an average American who does not earn as much as software professional. The Bay Area was becoming an unaffordable place for them.

Statistics show that the office vacancy rate rose to about 8 per cent in the first quarter of 2001, from 5 percent at the end of 2000. Rents have dipped about 20 percent as the area's technology companies cut back on expansion plans, according to a new study.

"Demands are almost non-existent," says an executive of a commercial brokerage firm in the valley. "Rents have fallen significantly and will continue to fall. We are still in some respects in short supply of available inventory".

A recent report by Rosen Consulting Group, a Berkeley-based real estate and economic forecasting firm, estimates 80 per cent of Bay Area's Internet companies will collapse next year, wiping out 30,000 jobs.

In San Francisco, the vacancy rate has risen to 7.6 percent at the end of first quarter of 2001, from 3.9 percent at the end of 2000. While California and other cities with a large concentration of technology-related companies suffer, some markets, including New York are holding up well.

Back to top

Tell us what you think of this report