This story appeared in the Antelope Valley Press on Wednesday, February 21, 2007.
LOS ANGELES - The Los Angeles County Economic Development Corporation, says the Southern California economy looks pretty good and the Antelope Valley - unlike other regions of Los Angeles County - still has lots of land available for development.
The organization's 2007-2008 Forecast and Industry Outlook, released today, says land availability and a business-friendly environment place the Antelope Valley in a unique position in heavily developed Los Angeles County .
"All areas of Southern California are in a growth mode. In the Antelope Valley , the key issue is the land that is available for industrial and logistics development in the urban core of Southern California ," said Jack Kyser, the organization's senior vice president and chief economist. "It would be a mistake for (local leaders) not to crank up the volume of the message up there - 'Hey, there's space up here and good workers available.' "
The report is a precursor to the more detailed LAEDC report due in July that breaks out data specific to 13 regions of Los Angeles County .
The report said total building permits were down by 14% for the year 2006 in the five Southern California counties: Los Angeles , Orange , Riverside , San Bernardino and Ventura . But in Los Angeles County alone, it said, construction "inched up in 2006, a mere 2.7% growth; with more than 61% of the units permitted being multi-family (condos and apartments).
"This reflects the lack of land available for new housing development in Los Angeles County except in the Antelope and Santa Clarita valleys."
Housing acts as brake
Overall, the report said, Los Angeles County "had a decent year economically in 2006. However, it will see slightly slower growth through 2007-2008, with housing acting as a brake."
The report added: "One segment to watch is the for-sale condo market where there has been a burst of development that seems to have out-run market demand. However, there will be positive trends in key industries, such a aerospace, business and professional services, international trade, technology and travel and tourism. The latter industry has come back strongly, and the 30 large conventions booked for 2007 will keep the momentum going."
An array of major projects in the county will keep the economy rolling along in 2007 and 2008, the report said, including the 7,100-seat Nokia Theater and the $2 billion Grand Avenue project in downtown Los Angeles . Also coming are light-rail lines from downtown to East Los Angeles and to Culver City , plus other transportation projects funded by the November 2006 state bond package.
Worker contract renewals
The forecast report said "there will also be drama on several fronts in both 2007 and 2008" - a possible strike by grocery workers when their contract expires in March; the expiration of the Writer's Guild contract in October; and the expiration of Directors and Screen Actors guilds contracts in June 2008.
A major risk, the report said, "is labor unrest in the motion picture-TV production industry. That 'de facto' strike in 2001 caused significant pain in the areas of the county with heavy exposure to entertainment. If there is a worker interruption in the industry, it would not be pleasant."
Other dramas include the battle for leadership of the Los Angeles Unified School District , "pushing and shoving over legislation requiring hotels along Century Boulevard at LAX to pay a 'living wage' " and local governments feeling the pinch of lower property taxes.
Flights to San Francisco
Kyser said the twice-a-day United Express service scheduled to start June 7 between L.A./Palmdale Regional Airport and San Francisco will be a business bonus, "providing more access for a lot of people."
The Antelope Valley , he said, has much to offer.
"Look at the area," he said. "It has a growing population, a growing business base and very positive attitudes. Business is the friend and not the enemy like in other areas."
Defense spending not over
Defense Department spending, a vital part of the Antelope Valley economy, is going through changes, Kyser said.
"We expected defense spending to taper off, but it may not happen."
The Antelope Valley , he said, reportedly has a number of secret defense programs - called "black programs" - that aren't known to the public.
"There are a lot of black programs going on in the Antelope Valley ," Kyser said. "At night scan the skies."
The report noted that the fate of the C-17 military cargo plane, assembled in Long Beach , is uncertain.
"More orders from the Department of Defense will be required by year-end 2007 to prevent the 'shutdown' process from starting again," the report said.
Office space shortage
The report said the shortage of office and industrial space is another pressing problem for the county.
Office vacancy rates in the county at year-end 2006 were at 9.7% and headed down.
"The situation was much more serious in the industrial sector where the year-end vacancy rate was just 1.5%, again with a modest amount of new space in development. Worse yet, residential developers are trying to scoop up industrial sites for construction of housing with no thought given to possible job losses," the report said.
The irony, the report said, is that the decline in manufacturing employment in the county looks like it is getting close to bottoming out. Because defense and "quick-turn" manufacturing work cannot be sent overseas, Kyser said, Southern California job losses are coming to an end.
The report said, "There is a shortage of developable land in the urban core of Los Angeles County , so there will be more disputes over how sites are redeveloped. Complicating the situation is the jump in land costs."
New businesses in county
Newcomers to the Los Angeles business scene, the report said, will be Wachovia Bank, UK retailer Tesco with its smaller food stores similar to Trader Joe's and apparel retailers H & M and Zara.
Nonfarm employment in the county will grow by 1.1% or by 43,700 jobs in 2007, and by 1.3% or 51,800 jobs in 2008, the report said. Personal income will increase 4.9% in 2007 and 5.3% in 2008, outpacing the cost of living, which will be up in 2007 in the five-county Southern California area by 2.5% and in 2008 by 2.6%.
The county's travel and tourism industry will continue to perform well, the report said, with a 0.4% increase to 25.3 million overnight visitors in 2007.
International trade also will continue to be a reliable engine of growth, with an 11.3% increase in the value of two-way international trade at the local customs district to a new record level of $365 billion.
Housing industry risky
The county's real estate industry, the report said, "will have a split personality over the next few years. After an increase in the number of housing units permitted in 2006 (up by 2.7%, thanks to the multi-family sector), the permit count will drop by 23.3% in 2007 and by a further 3.0% in 2008. Partially offsetting this decline will be modest gains in nonresidential building permit values of 2.5% in 2007 and of 3.2% in 2008."
The report calls the housing industry risky, "but especially the for-sale condo market which has gotten a little ahead of itself. Some developers will be at risk."
On the state level, the report said that trends in the housing market "will continue to be a drag on the economy."
"The state's budget will be in a deficit situation again," the report said, "while there are ambitious environmental, social and infrastructure programs being discussed in Sacramento . Who will pay for them?"
The slowdown in property tax revenues, it said, could cause government agencies to tighten their budgets, and "most government agencies will have to start accounting for their obligations for retiree pensions and health care."
Immigration, trade policy
The report anticipates that with Californian Nancy Pelosi serving as speaker of the house, attention will be paid to a guest worker program to cope with undocumented immigration.
"The latter could help the state's labor-starved farming industry," the report said.
Another item will be trade policy, the report said, "with the Democrats concerned about the movement of jobs offshore. The state has lost manufacturing jobs, yet the business of international trade has been a significant engine of job growth."
In the agriculture sector, the report points out that the severe freeze that damaged the fruit did not damage the trees themselves. Income from the state's farm sector, it said, was little changed from 2005 to 2006, but the job count will decline in 2007 due to freeze-related disruptions.
In international trade, the Transportation Worker Identification Credential will be implemented some time during the year. "There are concerns many of the port truckers won't be able to obtain a TWIC due to their immigration status."
Greenhouse gas legislation
Professional, scientific and technical services will continue to expand, the report said, but "an emerging driver will be compliance with AB 32, the greenhouse gas legislation. Many industries will need to determine their requirements and how to best meet them."
Technology should see decent growth, the report said, as will tourism, as the weaker U.S. dollar attracts international travelers.
On the risk side, the report said the housing downturn "could be more severe than currently forecast."
And, the report said, the already high operating costs for businesses in the state "will go up due to tight office and industrial real estate markets, which will translate into higher lease rates. Longer range, a significant investment will have to be made in the state's electric distribution system, and higher power rates will result."
The 2007-2008 Economic Forecast and Industry Outlook for California and Southern California was written by Chief Economist Jack Kyser and economists Nancy D. Sidhu, Eduardo J. Martinez, George Huang and Candice Flor.
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