SoCal Construction Activity Could Rebound Sooner Than Expected

Construction activity has slowed in Southern California since the onset of the pandemic—but it could be set to rebound earlier than expected. Commercial construction starts in Los Angeles and San Diego are expected to increase next year. Orange County, on the other hand, could be impacted by outcome of the presidential election in November; however, specific asset classes are set to rebound faster than others.

In Los Angeles, even hospitality is already showing signs of recovery. Retail is the only sector expected to struggle to recovery. “We expect that Los Angeles commercial office projects are going to be rolled out aggressively as soon as the general economic outlook improves,” Anu Rao, VP at JLL in Los Angeles, tells GlobeSt.com. “We see some activity around Los Angeles hospitality projects being renewed sooner than we expected, but retail is one of the last sectors expected to pick back up. Overall, the first quarter is going to be slower in Los Angeles construction as projects will be in design and permitting.”

Similarly, San Diego construction will also rebound quickly, but new starts will return at a slower pace than pre-pandemic levels. “San Diego commercial real estate construction will continue to increase, however at a slower pace than expected,” says Dominica Correia, VP of JLL in San Diego. “Industries that are continuing to do well are Industrial as well Life Sciences.  The typical office category will be slower to return as companies make business decisions based on employees working from home.”

In Orange County, however, construction activity next year will likely hinge on the presidential election. “The Presidential election this November will provide a much clearer lens as to the path for a construction recovery,” says Marty Potts, SVP of JLL in Orange County, explains. “We anticipate Orange County construction of multifamily, industrial and life sciences to maintain their momentum, as well as any service type business, while office TI’s and hospitality will emerge as the pandemic recedes and the return to work guidelines are further defined.  We expect to see downsizing in office TI’s. Tech companies will continue to seek Orange County as a more favorable location than other neighboring markets.”

Overall, construction activity should increase next year. “Construction activities in Orange County should escalate in 2021,” says Potts. “All in all, the effects of this pandemic has only impacted certain sectors, which has had an almost stabilizing effect on construction overall. Orange County is expected to emerge again across all sectors.”