Vacancies Suppress Southern California Recovery

[WriteDown]

Source: WSJ

ONTARIO, Calif. -- One drag on recovery in Southern California is illustrated by three new office buildings near the LA-Ontario International Airport. One is 60% leased. The other two sit empty.

While real estate is in a funk across the U.S., Southern California's economy is more reliant on the construction than many other places. So until these vacant buildings and hundreds of others like them fill up, the prospects for a rebound in construction and the broader economy here are bleak.

At its peak four years ago, construction was the fourth-largest employer in the Inland Empire counties of San Bernardino and Riverside, according to Jack Kyser, chief economist at Los Angeles Economic Development Corp., a nonprofit research group. The housing industry contributed more than $24 billion in revenue to the Southern California economy in 2008, or more than double the U.S. gross revenue from Hollywood movies, according to the Building Industry Association of Southern California.

Much has changed. "New construction is now literally stopped," said Katherine Aguilar Perez, executive director of the Urban Land Institute's office in Los Angeles. The industry has shed jobs as new building starts have plummeted....

Read more: http://online.wsj.com/article/SB124985862195117909.html#mod=whats_news_free?mod=igoogle_wsj_gadgv1

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These people all just need to move up to the Bay Area where the market is still good. :sarcasm:

[FarCenter]

1. We have enough office space to last the next few decades

Business process automation by more comphrehensive software systems and data networking, along with outsourcing off-shore mean that the type of jobs that need office space will decline.

Plus high-speed cellular data communications means that a lot of paper shuffling jobs can be done by people directly interfacing clients on the move.

[Sanity Claws]

2. Exactly

I think a lot of the office space already in existence will not be used. Technology will make it unnecessary for businesses to use as much office space as before. A business isn't going to incur the cost of renting space if it really doesn't need it.

Not sure what it will be used for -- residences?

[DBoon]

5. Could be converted into residences

Wouldn't be the first time:

http://en.wikipedia.org/wiki/1100_Wilshire

[kestrel91316]

3. In my apartment building I no longer have neighbors in my section.

My next door neighbors moved out in MARCH and they haven't got a new tenant yet. And now the people just down the stairs have taken their two kids and moved out, too. Management is being REALLY nice and accomodating with me about stuff, and is obviously desperate to hang onto what tenants they've got. Last fall, when it was time for the annual rent increase, they only raised it $20 (under rent control I think they could have raised it a little more than $50).

I think this fall I am gonna arm myself with comps (rents are actually DECREASING here) and ask for a rent reduction. If they don't have some new tenants in here they just might do it to keep me.

[Alcibiades]

4. It's unsustainable for an economy to be

so dependent upon new construction. There is a limit to the number of people who want to move out to Cali. Hopefully, part of the shakeout will be that the speculative aspect of the construction out there will diminish a bit and folks will only build what's actually needed.

[KakistocracyHater]

6. yes, endless "construction" is a fool's dream & not possible

they need to adapt & 'fill in', build high speed trains, build power plants that run on Human waste-that will keep our rivers, creeks, streams, & lakes cleaner, simply as a by-product. I think silicone-lined sewage pipes might reduce clogs & backups.

Change 'daisy-cutter' bombs by removing anti-personnel shrapnel & load them up with fire-retardants-better than any photo-op helicopter drop. Put high schools into abandoned/empty malls.

Outlaw empty abandoned parking lots-the ones without buildings nearby; build raincatching roofing, become the gold standard for catching water & filtering it ; use Roman concrete for all our roads-did you hear what the energy secretary said? If the roads & roofs were whitened it would reduce trapped heat?

[amborin]

7. plus, it's destroying so much habitat!