By BILL MURRELL
Construction on Orange County offices started ramping up in 2005 after a near stall in building. It peaked in mid-2007, when offices under construction totaled 4.3% of the total office space in OC, according to Torto Wheaton Research, a unit of CB Richard Ellis Group Inc.
From there, construction of new office spaced dropped back to 0.5% of the total office space and is projected to go to zero by mid-2010,a very sharp spike and drop.
Construction starts likely will remain at zero through 2012. Industrial completion rates have remained comparatively steady during the past four years at an average of 0.4% per year. Although this has been reduced to 0.04% (109,000 square feet) in 2009, it should ramp back up evenly during the next five years to 0.9% per year in 2014.
University of California, Los Angeles, economic forecasters are anticipating statewide construction spending to be down 15% from 2008, while 2008 recorded a decline of 12% from 2007.
This decline has obviously had a profound impact on the construction industry. With the commercial sector heading to zero office completions, many construction companies are looking heavily toward the public sector.
With billions of federal dollars scheduled for highway, military and education projects, contractors are expecting the majority of their immediate future income to come from government projects. An example is the $4 billion scheduled to be spent at Marine Corps Base Camp Pendleton during the next few years. This money will support a 500,000-square-foot hospital and barracks, as well as the repair of existing buildings. This influx could provide public revenue that is three times what it was three years ago.
Job Losses
Despite these opportunities, OC has lost more than 30,000 construction-related jobs since 2006.
Future office space construction in OC has a direct correlation to future office absorption and job growth. With absorption anticipated at a negative 704,000 square feet through the end of 2010 and total employment growth likely bottoming at a negative 6% in mid-2009, it is expected that office building construction will remain at a zero through 2012.
This is the case despite unemployment likely subsiding to a 1% growth rate by mid-2010. This projection is supported by current office vacancies of 16% having risen from 7% two years ago and projected to reach 22.5% in 2011.
While the construction boom seen a few years ago has subsided, future growth is certainly dependent upon the state of our national economy. While recovery will not happen overnight, the beginning is on the horizon.
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