We all curse the traffic. Yet it appears to be boosting economic prospects in the San Fernando Valley.
Huh? Isn’t that a non sequitur? Well, yes. But several prominent real estate professionals at a gathering last week in Burbank agreed with the sentiment that jammed streets and highways are helping the Valley’s economy. Albeit inadvertently and indirectly.
Here’s the logic: Traffic congestion is soul crushing, and it’s not getting better. The 101 Freeway through the San Fernando Valley by some accounts is the worst single commute in the country. Workers as well as business operators have dreaded their daily drive for years, but they increasingly feel empowered to do something about it. Now, more than ever, they can work from a satellite office or move their office entirely. And the Valley is a prime place to set up shop.
For example, Universal Music Group and Activision – companies you might associate with the Westside of Los Angeles – both have set up substantial operations in Woodland Hills in recent years. More of that is expected.
Another thing driving growth: the cost of property and construction is less in the Valley than in the L.A. basin, said John Parker, the co-founder and chief executive of the Parker Brown construction company.
And rents and office leases are lower, too. “There’s a competitive advantage for the Valley,” said Larry Green, the executive vice president of Unibail-Rodamco-Westfield. His company, which already owns and operates two big shopping malls in the Warner Center area, plans to spend $1.5 billion remaking the old Westfield Promenade mall into a huge mixed-use complex that includes a 15,000-seat arena.
The two appeared with other real estate professionals at an event called “State of the Valley,” put on by Bisnow.
One expert opined that, in less than 10 years, freelancers are expected to outnumber payroll employees. Those folks are the most likely to work near where they live, perhaps by renting a co-working space, which bodes well for the Valley.
“The Valley is in the early innings of growth,” another said.
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Some analysts lately have been reporting that a “shadow inventory” of houses may be sold in coming years in California. If so, it could ease the housing shortage.
If you haven’t heard about it, the premise is that baby boomers are only now starting to sell their houses. Many of them will move out of California because it is not friendly to retirees – dumping a surprising number of homes onto the market.
“The majority of the boomers are still on the brink of retirement,” according to a recent article in FT Journal. The Great Recession postponed retirement for many, but “retirees will soon regain their pre-recession confidence.”
It went on to say: “The shadow inventory of retiree homes for sale will thus manifest itself sooner rather than later.”
It’s a surprisingly big group. Residents over 65 years old make up 18 percent of California’s population, and that group grew 3 percent last year. And boomers are the biggest homeowners; according to several publications, 80 percent of them in the state own their homes.
That all adds up to a lot of homes turning over in the coming years. And one assumption is that many boomers will cash out and immediately decamp for states with lower costs and lighter taxes.
But I wonder. For one thing, Proposition 13 keeps property taxes low, especially for those who’ve owned their homes for decades. Longtime California homeowners may find they’re not so bad off just staying put. It’s only anecdotal, but I can think of two friends who fall into that category.
What’s more, it’s not clear that great numbers of baby boomers will retire outside of California. An article last week in Curbed LA cited a survey of economists by the San Diego Union-Tribune in which the consensus was that wealthier retirees had more reasons to stay. It also said residents of similarly expensive states are moving into California. Indeed, if you’re from, say, Massachusetts or New Jersey, California may be a compelling place to retire.
No doubt there is a shadow inventory of houses that must turn over in the coming years. Baby boomers may have done some remarkable things, but they’re not all going to stay in their homes and live past 100.
But it’s unclear how long it will take for boomers to sell. I wouldn’t be surprised if a large number of boomers stayed put into their 80s.
Maybe the shadow of this inventory isn’t all that long.