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Monday, Apr 15, 2024

New Year, New Outlook?

Last year was a rough one for businesses and consumers in the greater San Fernando Valley area. Decreased revenues, tight credit markets, unemployment and dwindling property values were just a few of the common themes. But with 2009 officially behind us, where does the Valley’s economy currently stand, and what’s in store for 2010? Unemployment in many local communities is less than county, state, and national levels, according to the latest statistics. And while some of the area’s industries are in for an extended bumpy ride, others may be poised for a comeback, said local experts. After interviewing local economists and those involved in some of the area’s biggest industries, here’s a sampling of where some big issues are headed in the next 12 months: Unemployment The seasonally unadjusted unemployment rate was 12.2 percent statewide and 12.2 percent in L.A. County at the end of November 2009, according to the California Employment Development Department. Nationally, it was 10 percent. For the same period, unemployment was: 5.4 percent in Agoura Hills; 9.9 percent in Burbank; 5.3 percent in Calabasas; 7.9 percent in Camarillo; 10.6 percent in Glendale; 17 percent in Lancaster; 15.1 percent in Palmdale; 11.8 percent in San Fernando; 9.1 percent in Simi Valley; 8.6 percent in Thousand Oaks; and 6.2 percent in Westlake Village. Most of the region faired decently compared to other L.A. County communities that are heavily reliant on manufacturing and international trade, said Jack Kyser of the Kyser Center for Economic Research at the Los Angeles County Economic Development Department. Lancaster, which posted one of the highest levels of unemployment in the region, was hit hard by the slowdown in commercial and residential construction, said Steve Gocke, project coordinator for the Lancaster Redevelopment Agency. The area’s retail sector has also been struggling. The city council is green-lighting a lot of capital development projects to offset some of the job losses, he said, and the city is aggressively trying to attract manufacturing and alternative energy companies to the area. “The city council is really trying to keep (money) on the streets,” said Gocke. “And we’re trying to diversify the local economy by branching into new frontiers.” Lancaster’s aerospace industry also remains fairly stable and there’s advanced R&D happening in the area, he added. Entertainment Even though box office numbers were good at the end of 2009, with the release of films such as “Avatar” and “Sherlock Holmes,” local film production has been in a prolonged downturn. Labor disputes, decreased advertising, studios doing away with specialty divisions, and productions going out of state are a few of the reasons. But Kyser believes the Valley’s entertainment industry may start coming back to life in 2010. California introducing tax incentives to spur local production is one of the reasons, he said. The incentives are necessary to compete with states like New Mexico and Michigan. The big question, however, is whether those incentives will go away as the state tries to deal with its budget problems. The City of Santa Clarita is one local municipality to watch. In April 2009, the city council approved a Film Incentive Program to court the film industry. The program is broken into three parts: eliminating permit fees for feature and television productions based in Santa Clarita; eliminating basic permit fees for production companies which film more than six times a year in the area; and providing a partial refund of the Transit Occupancy Tax. Last fall, Disney and ABC also announced plans to expand the Golden Oak movie ranch in Santa Clarita Valley. The plan, which calls for six sound stages, production offices and storage areas, may provide thousands of full- and part-time jobs in the area. Commercial Real Estate “Many brokers are glad 2009 is over,” said Michael Soto, senior regional analyst for Colliers International, “and 2010 is likely to be a year where we start to see some real trades.” Office vacancy rates continued to increase in the fourth quarter, with a high of 28 percent in Santa Clarita and a low of 13.8 percent in the Central San Fernando Valley, according to Soto. And companies are still giving back space in an effort to right-size. Office rents were two percent lower than Q3 2009 and seven percent less than the same time last year. There were a lot of REO and trustee office sales, he said, and the Valley is likely to see more distressed “trophy”-type properties hit the market in 2010. Industrial vacancy rates also continued to increase from 3.9 percent in Q3, to 4.2 percent in Q4. The Central and East Valleys experienced rates of 2.2 percent and 3.1 percent respectively. But Simi Valley, Moorpark and West Ventura County had vacancy rates of 5 percent or more. Soto said 346,900 square feet of new industrial space entered the market and the availability rate for sales and leases is almost 10 percent. In 2010, brokers are going to have to manage client’s expectations and landlords will have to be aggressive to attract and retain tenants, said Soto. Mortgages maturing will also give many buyers and sellers real reasons to make a decision. “There’s a lot of interest out there and people waiting on the sidelines,” he said. Residential Real Estate The residential real estate market moved at break-neck pace in 2009, especially for sales of homes in the $500,000 and less category. Median home prices also inched up. Sales were fueled by low interest rates and high affordability, the latter of which is tied to decreased property values and a slew of short sale and foreclosure properties on the market. The first time home buyer’s tax credit also spurred activity. But, Realtors are dealing with tight inventories as banks hold onto foreclosed properties. Jim Link of the Southland Regional Association of Realtors expects banks to release more properties in coming months. But there’s a big question about the extent of the so-called “shadow inventory.” “Current demand most likely will be able to absorb how ever many properties banks release,” said Link in the Association’s November market report. “Yet the market will not return to normal until it works its way through all distressed properties and traditional sellers return in greater numbers.” Realtors also expect more distress in the high-end residential markets in 2010. Technology Despite a national slow down in venture capital investing, Valley companies are still landing their fair share of money. In the third quarter of 2009 alone, four local companies secured a total of $32.3 million. Northridge-based Gamma Medica-Ideas, Inc. received $14 million; Glendale-based MyShape, Inc. received $10.5 million; Calabasas-based Kythera Biopharmaceuticals received $8 million; and Calabasas-based Masher Media received $300,000. On the biotech front, Amgen is getting closer to commercializing its osteoporosis drug denosumab. And Baxter Healthcare recently renewed and expanded its lease for more than 230,000 square feet of space in Westlake Village. There are also a number of Valley companies eyeing an initial public offering. At the end of December, online marketing company ReachLocal, Inc. notified the U.S. Securities and Exchange Commission of a proposed initial public offering. The firm, which has more than 700 employees worldwide, grew at a rate of 3,217 percent from 2005 to 2008. Investors are showing more interest, especially for companies in the biomedical sectors, said Jack Kyser. “And what you are seeing is people stirring the IPO front,” he added.

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