Open Minds On Urban Expansion Have Fueled San Fernando Valley's Economic Growth
California could be entering an economic slowdown. The state saw an economic increase of only 0.6% in Q1 and 2.1% in Q2, well below the national rate, according to a report from the U.S. Bureau of Economic Analysis. Job growth has stagnated across multiple industries, as housing prices continue to rise.
The San Fernando Valley has been an exception to the overall decline.
Information and technology companies have established HQs in the area, and average annual growth was 4.1% from 2013 to 2016. By comparison, the economy of the Los Angeles/Orange County statistical area grew at an average rate of just 3.6% over the same period, according to a report from California Lutheran University.
Long considered a suburban escape from Los Angeles, The Valley has embraced transit-oriented development and urban growth. Strategic densification, combined with existing single-family housing stock, has encouraged companies and workers to flock to the area, Executive Director of the Center for Economic Research and Forecasting at California Lutheran University Matthew Fienup said.
A case study for balanced growth
Many businesses have found opportunity in the San Fernando Valley, Fienup said. Studies like the Golden State Specific Plan have looked into development initiatives in high-traffic areas around the Burbank airport. Burbank received $800K from the California High-Speed Rail Authority and $389K from the Los Angeles Metropolitan Transportation Authority to explore the possibility of a high-speed rail station.
Transit accessibility will likely fuel continued job growth, especially within the technology sector. Information and technology, which includes software engineering, data processing and internet development, as well as the motion picture and video production industries, has grown by 74.1% over the past decade in the San Fernando Valley, according to the California Lutheran University report.
Developers have started construction on several mixed-use projects in The Valley. Westfield Corp. is transforming the Promenade mall site into 1,400 housing units and two hotels. In North Hollywood, NoHo West will bring 642 apartments, as many as 60 dining and shopping options, a grocery store, a gym and a movie theater.
Parker Brown, a contractor in Canoga Park, completed a $1.3M tenant build-out of more than 8K SF for Gelb Enterprises last year in the heart of Warner Center. The redesign led to an upscale two-story office complex with open layouts, high ceilings and glass partitions throughout most of the perimeter office walls.
The San Fernando Valley has not entirely given up its reputation as a suburban enclave, Fienup said. While the submarket has been open to urban development, single-family home construction remains strong.
“Millennials want livable areas close to work,” Fienup said. “But living in a city is more of a phase. As they age, many are more willing to accept a lengthier commute for more space. Housing of all types is needed.”
Ventura County’s conservative urban expansion
The Valley’s continued economic growth contrasts the decline faced by the rest of Greater Los Angeles. Nearby, Ventura County keeps losing money, jobs and businesses. According to California Lutheran University, the county’s economy contracted by nearly 1% last year. The forecast for growth in 2018 and 2019 is low, averaging just 0.35% over two years. Job growth in 2018 and 2019 is forecast to average 0.9% and jobs in high-paying sectors continue to decline.
Diverging opinions on urban growth and expansion are behind the different economic outcomes for two of greater Los Angeles’ more suburban communities, Fienup said.
Ventura County’s Save Open Space & Agricultural Resources initiative has played a large part in the county’s controlled densification. SOAR was passed in 1995 and gives county citizens the right to vote on the development of open space and farmland. While this has stopped urban sprawl, critics of the initiative argue the constant vetoing of urban growth has led to skyrocketing housing prices.
A report from 24/7 Wall Street found Ventura County homeowners on average spend 74.3% of their monthly income on mortgage payments while renters spend 63%.
“Ventura County has enacted stricter policies on expansion, which has affected housing affordability and caused biotech companies to leave the region,” Fienup said. “The San Fernando Valley has traditionally been more open to urban growth.”
Trouble on the horizon?
While job growth and increased construction hint at continued optimism in the San Fernando Valley, affordability remains a concern, Fienup said. Single-family home prices rose to $640K last year, a high price relative to the region. This has driven increased demand for multifamily housing, according to the report.
The fires that swept through the greater Los Angeles area in December, with the largest blazing in Ventura County, led to setbacks in economic capacity. The fires destroyed housing stock and took business away from the retail, leisure and hospitality sectors. Over 1,000 structures have been destroyed, while thousands of homes and businesses were threatened.
Fire damage has exacerbated the housing affordability crisis. In Northern California, Realtor.com found the median prices of homes in affected areas rose 6.1% in Sonoma County and 7.5% in Napa County. According to a report from the California Department of Insurance, commercial property owners in Sonoma County reported $480M in direct losses.
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