Based on NAI Capital research and other sources, California Forecast Executive Director Mark Schniepp has put together his midyear regional economic report, and the overall forecast is prosperity with a big chance of slowdown. Not surprisingly, Ventura County is particularly vulnerable on the downside. Schniepp debuted the study’s findings as keynote speaker at the L.A. County and Ventura County Entrepreneur Economic Forecast Conference at Hyatt Regency Westlake Village on Sept. 21. In his presentation, he noted three factors stunting growth in Los Angeles and Ventura counties: home prices, jobs and an aging population. “(People are moving) to places with more jobs and cheaper housing,” the report said. “This includes the Sacramento Valley, Central Valley and Inland Empire (and out of state).” By 2025, L.A. County’s population will approach 10.7 million, with the largest number of new housing units being produced in downtown L.A. and the Santa Clarita Valley. Ventura County, to reach 879,000 residents, will witness its greatest spurt in western part of the county. Today in L.A. County — where 156,000 residential units are in the development pipeline, along with more than 77 million square feet of commercial and industrial space — 30,000 of those units will go online in Santa Clarita Valley, with FivePoint’s Newhall Ranch project contributing 21,500 units. An additional 20,000 units are slated for the San Fernando and San Gabriel valleys. Centennial, with 23,000 homes and 14 million square feet of commercial due to break ground within a decade on land owned by Tejon Ranch Co., is the third-largest residential project underway in California. Camarillo and Simi Valley lead Ventura County residential development, where the county will produce 1,787 new homes in 2018 (down from 2,326 last year), with 19,184 homes in the pipeline. There are 6,249 residential units under construction; another 6,735 units approved; and an additional 6,200 units seeking entitlements. Schniepp’s study also found that L.A. county’s retail market is constricting. “Despite tight vacancy rates, new deliveries to the market have softened this year,” the report said. In L.A. County, lease rates have surpassed $2.50 per square foot and rose sharply in West Los Angeles, the San Fernando Valley and San Gabriel Valley. Office lease rates, as of Sept. 17, stand at $2.65 per square foot in the San Fernando Valley and $2.48 per square foot in Santa Clarita Valley. Oncoming non-residential square footage includes 18.6 million square feet in Santa Clarita Valley and 6.4 million square feet in San Fernando and San Gabriel valleys. Angst Over 2020 NAI Capital Executive Managing Director of Industrial and Investment Group Chris Jackson, who runs NAI’s Valencia office, recounted how he recently asked a client selling a five-building San Fernando Valley portfolio why he wanted to list. “‘Because we can’t afford our earthquake insurance on it and it’s time to move on to get something else,’” Jackson said was the reply. “A lot of people are a little bit worried about the Proposition 13 protection going away for commercial real estate on the 2020 ballot,” Jackson continued. “Nobody knows what’s going to happen, but it’s definitely something to be concerned about.” In 1978, Prop 13 initiated a property tax limitation, capping taxes at 1 percent of assessed value at the time of acquisition and limiting upward reassessments of property values to 2 percent annually, as long as the land had not changed hands. If repealed in November 2020, a “split roll” would eliminate the limits on commercial property, leaving the real estate vulnerable to frequent re-assessment by tax assessors. It would also lead to a divide between commercial property owners and public institutions as commercial land becomes more heavily taxed than residential properties. “Normally, you pass taxes through the tenant, but if you go from a valuation of $5 million to $8 million, the tenants will balk so the owner is going to have to absorb it,” Jackson explained. According to New York Magazine, revenue streams eradicated by Prop 13 could return an $11.4 billion annual windfall to state and local governments, with $4.5 billion going to schools. Repeal proponents have collected over 860,000 signatures, exceeding the 585,000 needed for certification. However, the business community believes such a repeal will discourage investment. Jackson believes there could be a mad rush to sell off property before this new law — if passed — commences in January 2021. “It won’t hit the recent ones because valuation will be high but private investors who pass it to family for generation to generation, it will affect them,” Jackson said. Staff Reporter Michael Aushenker can be reached at (818) 316-3123 or [email protected]
