Experts See Dark Lining in Valley’s Silver Cloud

After being ravaged by recession, the San Fernando Valley economy may now be facing the perils of prosperity, speakers at a Valley business conference said Friday.

Over the past five years, the Valley economy has bounced backed strongly from the nationwide economic downturn, the Northridge earthquake and a major downsizing in the aerospace industry.

The number of unemployed Valley workers dropped from 50,000 in 1995 to 40,000 this year, according to a report from Cal State Northridge released at the Valley Industry & Commerce Assn.’s 12th annual business forecast conference.

But several speakers said that with the economic rebirth, the region needs to take action now to avoid problems caused by factors such as a lack of affordable housing, a poorly educated work force and gridlock on the region’s freeways.

“Are we around the corner from another recession?” asked speaker Linda Griego, a board member with the Federal Reserve Bank in Los Angeles and former president of Rebuild LA. “What out there are the indicators of problems that are lurking?”

In his seventh and final State of the Valley address, Los Angeles Mayor Richard Riordan said the “first and most important challenge” facing the city and the Valley is education.

Darrell Brown, senior vice president for Wells Fargo Bank, agreed.

“I think the key thing is rebuilding our foundation and educating our children,” said Brown, who oversees the bank’s Valley region and attended Friday’s conference.

“That’s going to define the growth of the region. If we don’t embrace educating our youth, we will be in trouble.”

Another potential obstacle, speakers said, is the lack of affordable housing.

Daniel R. Blake, a CSUN economics professor, noted that the average sale price of homes in the Valley (single-family and condos), has gone from just over $200,000 in the first quarter of 1995 to nearly $300,000 in the first quarter of this year, a jump of 50%.

That’s due in part to the booming economy but is also a byproduct of a short supply of homes. With fewer homes on the market and less space in the Valley to build, the prices rise, in many cases to levels that put them beyond the reach of working-class families.

“We’ve used up the available space,” said Blake, who helped present CSUN’s annual report on the Valley economy. “We’re going to have to build.

“We can grow up, which means higher density, or out,” which chews up green space, he said.

Blake said the “dramatic growth” in the Valley over the past five years brought down double-digit office and industrial vacancy rates “and I think it put us over the top.”

“Now we have to build to grow,” he said. “We have to decide what kind of growth we want to foster and create a fast track for that growth to be approved.”

Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said that because of the lack of space for industrial growth, the Valley has lost some business to places like Riverside County.

“We’re already seeing a lot of erosion,” he said.

But with strong international trade and growth this year in the entertainment industry and high-tech employment, the Valley is “coming off one heck of a year,” Kyser said.

“We have had a tremendous amount of momentum,” he said.

For next year, Kyser forecasts a slowing of the economy and an increase in bankruptcies among small businesses. That’s especially true, he said, for small suppliers to the entertainment industry who might be hurt by possible strikes.

Next year “will definitely be a weaker year,” he said, anticipating the impact of increasing energy prices and the possible entertainment strike. “People will be pulling back.”