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Residential Construction is Down but Not Out in Santa Clarita

Thanks to its unique market, Santa Clarita has managed to weather the downturn in real estate that has shaken other regions of Southern California and the nation. “The slowdown in the residential market is having a marginal effect,” said Rob Gilmore, president of LA County Public Landowners’ Assistance Network (LA PLAN). Gilmore was director of Newhall Land’s commercial industrial division for three years and has worked in commercial real estate as a broker and developer for 25 years. “I think by-and-large up in Santa Clarita it’s going to continue to be an excellent area for real estate development,” he said. “There continues to be huge demand for housing throughout Santa Clarita.” Paul Brotzman of Santa Clarita’s Community Development Department agreed. He stressed that the city’s market stands apart from nearby regions. “In areas like Santa Clarita, I do not think it’s affecting it as hard as the Inland Empire areas and some of the other more outlying areas like Stockton and Bakersfield,” Brotzman said. That’s not to say that Santa Clarita hasn’t been at all stung by the rocky real estate market. “It’s slowed down seriously in terms of the amount of housing units currently being built and sold, but building and selling is still happening and still going,” Brotzman said. The city overcame what was arguably its bleakest point in real estate in January when the average number of days a home was on the market dropped to 105 from 132 in December. Still, Santa Clarita has yet to match its August 2007 figures, when homes stayed on the market for an average of just 99 days, or its October figures, when the number was 101. While housing development has slowed in the Valley overall, Brotzman said, the city of Santa Clarita has increased the number of residential permits it issued compared to the same period last year. In January 2007, the city issued just two residential permits while in January 2008, 11 were issued. That’s more than the eight permits issued in all of the last three months of 2007. “The vast majority of the residential development projects that are underway in the Valley are in the unincorporated area,” Brotzman said. Marlee Lauffer, senior vice president of marketing and communications for Newhall Land, a company that sells finished lots through various homebuilders, acknowledged the sales pace is slower than in the recent past. But, she emphasized, “We focus on the long term picture. We’re continuing to process our plans in the remaining areas of Valencia and the future Newhall Ranch community.” Groundbreaking on Newhall Ranch is slated for early 2009. Newhall Land aims to build approximately 21,000 homes in undeveloped areas situated west along Interstate 5. The company plans to focus on commercial industrial development as well, Lauffer said. Gilmore attributes Santa Clarita’s ability to withstand the real estate industry storm, in part, to its lack of developable land. Moreover, the City’s market for commercial industrial land differs from that of Los Angeles County, he said. “On the commercial side, there have historically been low vacancy rates for industrial and office space. That’s not to say if we end up slowing down even more that it won’t have some large effects,” he said. “I think what you’ll end up seeing is companies ending up having to sublease space. That will bring more space back in the market. New development will be a little more conscious because the vacancy rates will go up without having new development come into the market.” Gilmore believes that if the economy and real estate market continue to slow down, the commercial and residential real estate markets will be affected differently. “You have retail, industrial and office space and each one is a specialty in and of itself. You need to be very conscious after the product type you’re looking to build,” he said. But Gilmore believes that housing is arguably the most influential market. “Once you have the housing, you’ll have the rest of commercial real estate that will be following behind,” he said. “You can bring in retail, bring in the offices.” According to Jason Crawford, Santa Clarita’s marketing and economic development manager, the city has more than a million square feet of new retail development set to open this year. “We are definitely a community that still has lots of opportunities to grow,” Crawford said.

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