Growth Forecast in our Economy

Perception is that our California economy has reached the bottom!

 Are there signs of real optimism? 2012 looks like a turning point in our economy, or is it?  

* Business spending accounted for majority of growth.

* Employment less than impressive.

* New home development has not seen a rebound yet.

* 2010 banks will have taken over 1.2 million homes. (Is a double dip rececssion in the housing market on its way? Banks are slowly moving inventory to prevent a major drop in the residential housing market. The next 3 years will be interesting)

Class A Properties are continuing their run up in prices and low cap rates as investment group are bidding up the prices trying to take advantage of this market. All other classes are still struggling and will continue to have its challenges this year.

Allen Matkins/UCLA Anderson Forecast California Real Estate Survey

California Real Estate Survey

San Fernando Valley Office Rental Market Picking Up Slowly

Year end 2010 left us with conservative but encouraging recovery in the office sector.  Still the fourth quarter left landlords with presistent challenges ahead.  With multiple spaces for quality tenants to choose from, low market rents coupled with high improvement cost have pushed majority of the smaller landlords without deep pockets out of this leasing market. Not to mention the need for many existing tenants that has excess space trying to downsize.

The pace of lease transactions have picked up toward the end of the year as confidence in our economy is slowly recovering.   Over the course of this year, we should see a stabilization of rents as we have seen a decline for 12 straight quarters.  New employment and business growth is certainly the leading factors to stabilization of rents and absorption of excess space.

San Fernando Valley Enterprise Zone Expansion

The City of Los Angeles has expanded the Enterprise Zone to now include Chatsworth, Canoga Park, Van Nuys Airport Area, Woodland Hills and the Northeast Valley.  Some of the incentives below:

• Employment tax credits of $37,400 per employee hired, spread over five years;


• 35 percent utility rate reductions over five years from the Department of Water and Power;


• Sales and use tax income credits for purchases of machinery and equipment;


• Lender interest deduction for loans made to Enterprise Zone businesses; and


• Priority bid preferences for Enterprise Zone businesses bidding on state procurement contracts.

The Enterprise Zone sounds interesting, but will it be effective in stimulating the growth and development of new and existing business in the San Fernando Valley? 

From the surface the benefits seem apparent in the manufacturing and distribution sector. And this benefit isn't just for a tenant, but as a landlord you reap the benefits of less stringent city ordinances and flexibility to allow for a few more types of uses. And in conjunction to the other city monies floating around for real estate owners, if you can find it "CRA", you might just be in luck.

So this enterprise zone solution is going to stimulate the economy, right? You have a great business plan. As a new business in the enterprise zone, you get 100% tax credits for the purchase of new equipment and machinery to get your business going.  You can hire someone that qualifies under any one of the 13 different categories (saves you up to $13,440 over a 5-year span), like the recently laid-off and don't forget those living in the work opportunity tax credit area which saves you and additional $2,400 per year. You have reduced parking requirements, city fee waivers, and DWP rate discounts that all put money back in you pockets, right.  It does seem promising.

So the question is, where can a new business get a LOAN? Um! Are we still at the mercy of the banks and politicians that help nurture the lending incentives? Until the key to lending is turned on, it's going to be a slow process to get things jump started. 

SEZ Zone Expansion Info Package