Homes under construction in Porter Ranch, CA., Tuesday, September 27, 2016. (Photo by Hans Gutknecht, Los Angeles Daily News/SCNG)
U.S. construction activity reached its highest level in more than a decade in November, according to new federal data. But in Southern California, homes and offices weren’t built at quite the same breakneck pace.
Nationwide, construction spending rose 0.9 percent in November, according to the Commerce Department. That’s up from a 0.6 percent increase in October.
The increase reflected solid gains in home construction, nonresidential building and government construction activity, equating to an annual spending rate of $1.18 trillion.
Construction in the Los Angeles region jumped, too, but land availability and environmental regulations muted that activity.
Los Angeles County saw thousands of construction job losses over the past year — all told, about 8,300 jobs lost from January through November, according to figures from the state Employment Development Department.
Some of that activity might be going to L.A.’s neighbors in the Inland Empire — San Bernardino and Riverside counties added a total of 5,700 construction jobs in the same time period.
Local economist John Husing said most of the construction work underway in the two-county region revolves around freeway infrastructure, large industrial buildings and the construction of homes.
He said Majestic Realty Co., Prologis and Watson Land Co. were some of the prime developers of large industrial buildings in the two counties.
Industry-based Majestic, the largest privately held developer and owner of master-planned business parks in the U.S., recently completed construction of a 239,400-square-foot warehouse in Ontario that will be occupied by Melmarc, a clothing embellishment and packaging business.
Kyle Valley, Majestic’s vice president, said the company has a variety of other projects that are underway.
“We have a 1-million-square-foot building in Chino that’s under construction and another 180,000-square-foot facility next to it that’s being built,” he said. “And we’re about to break ground on another 480,000-square-foot building in Tejon.”
Valley said more companies are opting to move their operations to the Inland Empire where land is cheaper — and readily available.
“The quality of life is also becoming comparable to other parts of Southern California, so it makes sense to relocate here,” he said. Husing said it’s all about the land.
“If you’re going to build large industrial buildings you’re going to build them here because there’s not any room left in L.A. County,” he said. “They don’t have a lot of space for new housing either, and when there is space CEQA is used as a tool to block housing projects. That has shut down a good deal of construction.”
CEQA, the California Environmental Quality Act, requires state and local agencies to identify significant environmental impacts that projects would create. Developers must avoid or mitigate those impacts whenever possible.
Speaking at a California housing summit in downtown Los Angeles in October, representatives from Orange County, San Diego and San Francisco weighed in on the issue.
CEQA challenges, they said, are typically motivated by a not-in-my-backyard mentality. CEQA has been used extensively in the six-county region served by the Southern California Association of Governments or SCAG, as it is known.
“Fourteen thousand housing units were challenged in CEQA lawsuits over the past three years in the SCAG region,” said Jennifer Hernandez, a partner with Holland & Knight, a San Francisco-based law firm that specializes in land-use issues. “Seventy percent of those were high-density housing projects in transit-priority areas and high quality transit locations.”
Husing said homes are being built in the Inland Empire, but at a sluggish pace.
“Residential construction is coming back little by little,” he said. “It’s the strongest it’s been in years but it’s nowhere near normal. We’re still at a 1990s level.”
Economists believe construction will continue to show gains in 2017, reflecting a strong job market with unemployment at the lowest point in nine years.
“I think things will at least continue at the pace of last year,” Husing said. “There’s a lot of demand for e-commerce and infrastructure. And if you listen to [President-elect Donald] Trump … I see that continuing.”
Despite the slowed pace in the Los Angeles area, there are still plenty of projects planned or underway across the region.
Eric Duyshart, Pasadena’s economic development manager, noted several in his city.
“Pasadena has had very strong hotel occupancy rates for a number of years,” he said. “And people are looking for that type of investment. Right now we have six to eight hotel proposals that are moving through the entitlement phase.”
According to a third-quarter report from the city manager’s office, the opening of a 144-room Residence Inn by Marriott was the first new hotel to be built in the city over the past 15 years. Another 883 building permits were issued during the third quarter with a total value of more than $42.8 million.
In Santa Clarita, the Oliver Hotel Group will start construction on a 140-room hotel this year, according to Jason Crawford, the city’s planning and economic development manager.
“It will be an extended-stay, all-suites hotel,” Crawford said.
Logix Credit Union is also moving its headquarters into a custom-designed building that broke ground in Santa Clarita in October. And developers will soon start work on Needham Ranch, a business park with 4 million square feet of office and industrial space.
By Kevin Smith, San Gabriel Valley Tribune
The Associated Press contributed to this report.