Transition Year Seen for Builders

The Southland’s important construction industry may be phasing out one period and entering another in its inevitable cycle of building activity.

Inside and outside forces will tend to make 1987 a year of transition, while other factors present serious long-range concerns for next year.

A lengthy annual report by the Los Angeles Area Chamber of Commerce on the state of construction in a five-county area outlines those matters, although anticipating that construction employment for the remainder of this year will hold steady because of a continuing demand for single-family housing and warehouse/distribution facilities.

“This industry . . . accounted for 235,000 jobs and 634,000 indirect jobs last year,� Ray Remy, chamber president, said, referring to a five-county region of Los Angeles, Orange, Ventura, Riverside and San Bernardino counties.

The industry’s near-record activity since 1984 in residential, commercial and industrial sectors provided the major thrust for the region’s overall economy and probably represented “the high point in the current economic cycle,� Remy added.

He identified the “looming uncertainties of 1988� as the impact of last year’s enactment of tax reform legislation, overbuilding of office space in some areas, what might evolve in the wake of Proposition U (limiting new construction to specific areas within Los Angeles) and potential sanctions by the Environmental Protection Agency because of non-attainment of air quality standards.

The report, issued to coincide with the chamber’s 52nd annual construction industries banquet, also referred to proposed federal legislation on union and non-union operations by construction firms.

(Because unions are losing jobs to non-union workers, organized labor is lobbying heavily for preventive legislation.)

The Construction Industry Research Board calculates that every job in construction creates 2.7 other jobs. Half of those new jobs would be in architecture, engineering, manufacturing of building materials, real estate development and financial services; the remainder would reflect the impact on wages received by those in the construction industry.

In the report’s housing category, the “hottest spots� in 1986--and continuing into this year--were in the Riverside-San Bernardino, Oxnard-Ventura and central and southern Orange county areas.

San Bernardino County, with a 53.6% rate and Ventura County, with a 44.1% mark, topped the field in total building permit valuation gains last year over 1985, while the five-county region listed a very significant increase of 22.9%.

Not to worry about office space vacancies either, the chamber says, because Los Angeles County, as of March, had the lowest vacancy rate (16.5%) of any western metropolitan area. But Orange County checked in at 22.8% while the national figure was 21.5%.

Southern California’s industrial vacancy rate was 6.1% (for the five aforementioned counties and San Diego County) compared to the national mark of 5.9%.

Finally, indicating the winding down of commercial office space construction last year, there was a 7.5% drop in permit valuations in Los Angeles County, while Riverside County posted a 14.9% drop. That resulted in an overall five-county negative figure of 0.1% for 1986.