Unusual Economy Affects California Real Estate
There is good news in prospect for some Southern California real estate sectors was the gist of MIT Professor William C. Wheaton's report to listeners at one of Southern California’s best-attended real estate conferences. Wheaton, an urban economist, was a lead-off speaker at the UCLA Anderson School's Real Estate Forecast Conference in early June. It was the first joint conference between Anderson’s Forecast Center and the Ziman Center for Real Estate, and attracted more than 350 real estate professionals from throughout the state.
Professor Wheaton focused on the unusual nature of the current economy in that the recent recession is the first that was caused by a business contraction rather than consumer contraction of demand. It also featured loose as opposed to tight monetary policy. As a consequence, corporate-serving real estate sectors (office and industrial space) have experienced unusually strong contractions in space demand. By contrast, consumer-serving real estate sectors (retail centers and apartments) have been only mildly affected.
Southern California (Greater Los Angeles and San Diego is doing better in most respects than the nation as a whole. While the office market is following the steep national decline, the industrial market is one of the few bright spots in the country. This is because Asian trade continues to expand and its preferred ports of entry are in that region. Southern California's retail markets are continuing to see rental increases and growth in demand, as is the apartment market - largely because of a shortage of new development.
For details, see the major points of his PowerPoint presentation (pdf, 3M).