The Outlook: : . . . Interest Rates, Traffic and Anti-Growth Forces May Put Damper on Real Estate

Stingier lenders, clogged freeways and a grass-roots anti-growth movement could slow the local real estate industry next year.

That’s the consensus of many of the participants in a real estate forum attended by an estimated 1,200 people in Anaheim Friday.

While the economies of Los Angeles and Orange County are thriving, some cracks have appeared in the markets for office space, apartments and even retail space in malls and shopping centers, the participants said. Retail space had been one of the hottest markets until recently.

“Rarely have I seen so many imponderables at play that affect the development industry,” said Richard M. Cannon, president of Watson Land Co. in Carson.

Here’s the outlook for housing, offices, factories and malls next year:

- Office buildings already are running vacancy rates of more than 20% in Orange County, and the outlook for the types of companies that fill office space--banks, stockbrokers, lawyers and accountants, for example--is not very good, said Marvin Richman, president of Olympia & York California Equities Corp. in Los Angeles.

Many of the big brokerages have merged or been acquired, a process accelerated by October’s stock market crash, Richman said. That means a loss of jobs, and when those companies don’t grow, neither do the professional firms that depend on their business, such as law firms and accountants.

Meanwhile, developers continue to build offices even though demand is anemic, Richman told the seminar, sponsored by the Building Industry Assn. of Southern California and the USC Law Center Property Forum. “Nobody ever accused developers as a group of being overly rational,” he said.

- Single-family housing is likely to be one of the bright spots in the Southern California real estate industry next year, fueled by the area’s strong population growth. But much depends on whether mortgage interest rates rise again and whether buyers have confidence in the economy. Opinion among the experts at the forum was divided over the direction of mortgage rates next year.

But slow-growth movements in Orange and Riverside counties could be a bigger obstacle to home builders. Groups in both counties are trying to get initiatives on the ballot next year that would significantly limit development.

The industry “cannot be defensive” in the campaign it is preparing to wage against the initiatives, said real estate consultant Sanford R. Goodkin. “A half million dollars in ads saying the economy is going to fall apart is not going to do it.”

“We have no constituencies at all, except for our workers,” said Goodkin, executive director of Peat Marwick/Goodkin National Real Estate Consulting Group in San Diego.

- Owners of factories and industrial buildings will see fewer tenants and buyers next year, said Robert M. Campbell, a general partner of the Birtcher Development Co. in Laguna Niguel. And more buildings “are still coming on the market,” Campbell said.

Vacancy rates in most types of local industrial buildings are between 25% and 30%, not counting tenants lured into industrial buildings by free rents and other incentives, Campbell told the group.

Land and labor for factories is scarce in Orange County, and more developers are beginning to build in neighboring Riverside County, where high vacancy rates could also develop soon in some markets, Campbell said.

- After phenomenal growth in the 1970s, demand for retail space in malls and shopping centers is beginning to slow down. Even more recently, retailers have become “very, very nervous” since the October stock market crash as they wait to see whether consumers will cut back spending, said Brian M. Jones, a vice president of Forest City Development in Los Angeles. With the explosion of malls and shopping centers, it’s also getting harder to find good locations, Jones said.

One area where shopping centers--and to a lesser extent, malls--will continue to pop up is Riverside and San Bernardino counties, because those counties are also in the midst of housing booms and rapidly growing populations.

Developers who spoke at the real estate forum--held at the Anaheim Marriott--were generally more pessimistic than the brokers who must market the buildings.

The outlook for the local industry is “clearly not gloom and doom,” said John C. Cushman III, president of Los Angeles-based Cushman Realty Corp., responding to previous speakers at the forum.