SoCal Industrial RE Benefits from Asian Economic Expansion

According to the USC Lusk Center for Real Estate's annual Casden Forecast, there's at least one sector in Southern California doing better than expected: industrial real estate. The report noted that a 16.9 percent increase in port traffic in the region in 2010 compared with last year will help stabilize, and in some areas, increase, industrial rents in the Southern California region.

December 8, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Bohman

Are there any bright spots for any kind of commercial real estate in any market, besides the well-documented strength of multifamily? According to the USC Lusk Center for Real Estate’s annual Casden Forecast, there’s at least one sector in Southern California doing better than expected: industrial real estate.

The report noted that a 16.9 percent increase in port traffic in the region in 2010 compared with last year will help stabilize–and in some areas, increase–industrial rents in the southern California region. The strong Chinese and Indian economies, combined with the weakened U.S. dollar, have increased demand for U.S. manufactured goods and greatly increased port traffic.

If industrial rents go up, will industrial development in SoCal get a kick start too? Maybe. “The modest revival of the commercial mortgage-backed securities market will provide an additional source of funding for developers of larger projects, but one should still expect relatively conservative underwriting,” Tracey Seslen, co-author of the Casden Forecast, told CPE.

“But there’s already significant construction underway in the Inland Empire–2.2 million square feet of industrial space was completed between the third quarter of 2009 and the third quarter of 2010, and another 2.5 million square feet is under construction in the Ontario Airport region alone,” Seslen continued. “We could see problems if developers get too exuberant before we see a sustained pattern of recovery in the SoCal indsutrial markets, but port traffic and manufacturing numbers suggest a promising outlook.”

TransUnion Predicts Mortgage Delinquency Drop in ’11

Credit bureau TransUnion L.L.C., after crunching a lot of data, predicted that the percentage of U.S. mortgage holders who are delinquent on their loans will drop to 4.98 percent by the end of 2011. As of the end of 2010, that figure is expected to be 6.21 percent, which is already down from an all-time high of 6.89 percent during 4Q09.

The states projected to experience the greatest decreases in mortgage delinquencies–Nevada, down by 24.77 percent; Arizona, down 24.27 percent; and Florida, down 23.90 percent–are the same places TransUnion predicts will still have the highest 60-day mortgage delinquency rates at the end of next year (Florida, 11.06 percent; Nevada, 10.87 percent; Arizona, 7.59 percent).

The overall downward trend in delinquencies “will be driven by a slowly improving unemployment picture and continued stabilization in housing prices,” noted Steve Chaouki, group vice president in TransUnion’s financial services business unit, in a statement. “While there is continued price pressure in many markets, we expect a growing number of areas of the country to experience a rise in property values, along with some stabilization of values in those states and markets hardest hit by the recession.”

Consumers Borrowing More For Cars and Tuition

Consumer credit (everything but mortgages) bounced upward year-over-year by 1.75 percent in October, according to the Federal Reserve on Tuesday, rising at an annualized rate of $3.4 billion. That was the largest jump in consumer credit in more than two years. The rise was led by nonrevolving credit, which spiked 6.75 percent this October compared with October 2009, while revolving credit dropped 8.5 percent.

In other words, consumers aren’t using credit cards with abandon. Rather, they’re buying cars and education: auto loans and student loans were up 6.8 percent year-over-year. As the new primary lender to students, the federal government has increased its lending.

Wall Street was up most of the day on Tuesday, but ended slightly mixed. The Dow Jones Industrial Average lost a minuscule 3.03 points, or 0.03 percent, while the S&P 500 and Nasdaq were up 0.05 percent and 0.14 percent, respectively.