Is the outlook for business in Orange County hot or strong?
The local economy is well beyond the recession, riding along nicely enough to raise the question of whether it will stay in its groove of smooth strength or set out on a hot streak in 2015.
Bet on strength, thanks to a number of factors that reflects perhaps the most important characteristic of OC’s business landscape: its diversity.
Nearly all of the key industries—from real estate to drugmakers, from restaurants to consumer goods—had highlights to cheer over the course of 2014. Each also showed signs that suggest that the growth trends of the past year are sustainable.
Real estate entered the year hot on the home building front, with the industrial sector still warm after getting out to an early start on the recovery, and offices and retail finally moving to join the trend.
Speculative commercial development is back in OC, but even that looks a bit different from past recoveries—the trend is relatively modest and took nearly seven tough years to shape up.
The long haul back from the recession looks to be enough to keep the industry from charging ahead with abandon this time around—at least for next year.
The finance sector showed similar restraint, even as it notched impressive growth. There are now several banks with more than $1 billion in assets based in OC and a couple more on the cusp.
Signs that this year’s developments will lead to long-term strength rather than temporary heat can be found in a number of developments.
A number of the biggest commercial banks with significant operations in OC offer one such signal with their focus on companies with a stake in the growing export economy here (see related story, page 1). That looks like a bid for long-term strength, even amid a strong real estate market—a choice that could represent a major shift from traditional patterns.
Hotels
Local hotels went from recovery to renovation, with several projects following a run of healthy increases in occupancy and room rates, helped in large part by growing numbers of tourists and business visitors.
Restaurants seemed to get over the recession all at once last year, with a couple of examples of the development coming in OC, where Costa Mesa-based El Pollo Loco Holdings Inc. and Habit Restaurants Inc. in Irvine went public and have seen their shares rise significantly. El Pollo Loco’s market capitalization was nearly $800 million last week, while Habit checked in around $300 million.
Those companies and others in the broad field of publicly traded and private restaurant chains based here showed fundamental strengths in 2014.
BJ’s, Wahoo’s
BJ’s Restaurants Inc. in Huntington Beach got back on track in the casual-dining segment, and Costa Mesa-based Wahoo’s Fish Taco spent much of the past year adding finesse to its operations and menus after curtailing an earlier expansion plan.
The larger chains that call OC home seem sensibly positioned with cautious expansion plans for the year ahead. Some smaller competitors, such as relative newcomer Pieology Pizzeria in Irvine, have set ambitious targets for expansion that could test their growth capacity.
The local technology landscape saw Broadcom Corp. make a couple of key decisions: It ditched its baseband business in favor of longtime strengths in connectivity chips, a back-to-basics move that has earned strong reviews from analysts and investors.
Broadcom also managed to make waves in local real estate circles when it decided on the Great Park as a site for a new 72-acre headquarters campus.
Consumer goods? Check Irvine-based Boot Barn Holdings Inc., which went public in late October and now has a market capitalization of close to $400 million.
Healthcare? There’s a local industry that could shrink next year, depending on how it’s measured.
Allergan
Irvine-based drugmaker Allergan Inc. is due to become part of Actavis PLC in New Jersey once the $68 billion deal closes. The Allergan deal was bookended by the $5.8 billion sale of Anaheim-based Questcor Pharmaceuticals Inc. to Mallinckrodt PLC, a drugmaker with tax-friendly headquarters in Ireland, and Aliso Viejo-based Avanir Pharmaceuticals Inc.’s $3.5 billion sale to Otsuka Pharmaceutical Co.
Even the developments at Allergan could lead to growth for the healthcare sector overall in OC.
Early signs point to Allergan’s headquarters in Irvine becoming the center of Actavis’ specialty pharmaceutical division. Meanwhile, word that most of Allergan’s upper-tier executives will be trimmed along with a portion of the company’s research and development operations as Actavis takes over could give a boost to recent startups here, or fuel new enterprises.
