UCLA Forecast Remains Upbeat for Southland

LOS ANGELES-The super-hot residential real estate boom is expected to continue throughout Southern California, the commercial sector here is still doing substantially better than it is in Northern California and the state could start pulling out of the recession in the third quarter, according to forecasters at a UCLA conference titled, “From Global Crisis to Fragile Real Estate Markets.”

At a joint conference hosted by UCLA Anderson Forecast and the Richard S. Ziman Center for Real Estate at the university, experts predict gains will be made later this year in California’s high-tech manufacturing and continue through 2004. The positive outlook for Los Angeles County and Southern California comes despite continuing problems in Northern California.

UCLA senior economist Chris Thornberg’s report, “Trouble in Paradise? Not Really,” forecasts growth in a number of trade sectors, including retail and wholesale, business services, professional services and health care. And, the film industry is expected to recoup some recently lost jobs.

Citing statistics showing that home prices are still rising, the forecast points out homebuyers are taking advantage of unusually low interest rates, which should continue to fuel the residential building boom. On the commercial side, conditions have cooled, the forecasters say, but Southern California’s commercial markets remain considerably stronger than those in the northern part of the state, which suffered acutely in the dot-com crash.

Vacancy rates in the Los Angeles area “have been remarkably stable, rising only a few percentage points,” the forecast says, noting that investing in Southern California commercial properties has remained solid despite a drop in commercial investing nationally. In particular, the UCLA reports cited the brisk pace of investment in San Bernardino and Riverside counties, where new investment in the region equals about half of what it is in Los Angeles County–despite a population base in San Bernardino and Riverside counties that is only half the size of LA’s.

Non-residential investment in Orange County has seen the largest decline in the region, nearly 50%. This reflects the increase in vacancy rates in Orange County from under 10% to more than 15% during the economic slump. The forecast says the San Bernardino-Riverside region is the only strong market for new office and industrial space, with one-fourth of the new commercial investment dollars in those two counties moving into the office sector.