ORANGE COUNTY, CA—Residential construction has been picking up in Orange County, and some say that the deliveries this year will have a significant impact on the region's commercial real estate. Others, however, are still on the cautious side.
“We are starting to see the rooftops come back,” Matt Hammond, director of retail brokerage for Coreland Cos., tells GlobeSt.com. “Shea Baker Ranch in Lake Forest is bringing 2,800 homes on board, and out in the Inland Empire, a lot of homebuilding is kicking off and under construction. It's a good sign; everybody is pretty optimistic.”
Hammond points out that the deliveries are a positive indicator for the retail sector. He adds that his biggest concern is that retail deals will slow down because there's not a lot of space to lease. A lot of deals are getting done, but now it's harder to find quality space so tenants can grow. They're doing it cautiously. There's not a lot of low-hanging fruit to lease, so we have to create opportunities.”
As Hammond told GlobeSt.com recently, “We're seeing some clients who have relationships with tenants like Dunkin' Donuts, Starbucks, Chipotle or grocery stores looking to buy the centers where those tenants want to be. They may redevelop that center, but they have tenants in tow. Some of the current owners of these centers may not have the money or aren't sophisticated enough to deliver space to large grocers.”
Rick Sharga, EVP of And Daren Blomquist, VP of RealtyTrac, which focuses its research on the residential real estate market, is similarly cautiously optimistic about residential deliveries next year. “With its low unemployment, well-paying jobs and dearth of distressed properties competing with new homes, Orange County is a bit of a no-brainer for developers looking for a safe place to start building again,” he tells GlobeSt.com. “We expect more developers to deliver more new homes in 2015, helping provide inventory just in time for move-up buyers who finally have enough equity, which in turn will provide more lower-priced inventory for first-time homebuyers. Still, developers should continue to proceed with caution, even in a market like Orange County.” Blomquist is also cautious about home-price acceleration for this market. “Home prices have rebounded so quickly that the market is very close to hitting a ceiling in terms of affordability, which means little room for rapid price growth going forward. Instead, builders should plan for single-digit or even flat growth in home prices over the next two years until wages once again catch up with prices.” As GlobeSt.com reported earlier this week, more than half of major US markets are experiencing home price-appreciation deceleration, according to a report from RealtyTrac. In addition, the firm reports that REO and short sales are also on the decline nationwide.Recommended For You
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
