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Econowatch

NOVEMBER 2022

SANTA CLARITA VALLEY BUSINESS JOURNAL · 21

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Economic DEvElopmEnt corporation

26455 Rockwell Canyon Road | UCEN 263 | Santa Clarita, CA 91355 | (661) 288-4400 | www.scvedc.org

SCV’s Economic Update & Forecast for 2022 and Beyond

BY HOLLY SCHROEDER

President and CEO of the Santa Clarita Valley Economic Development Corp.

Designed to provide attendees with an economic analysis and outlook for the coming year, the 2022 Economic Outlook Conference included global, national, and state perspectives, while focusing primarily on the trends and issues associated with the Santa Clarita Valley and the surrounding business community. Alongside the conference the SCVEDC also releases its Outlook Book, containing more in-depth data and economic forecast information.

Summary Overview:

• Our population continues to grow steadily, and we built almost 2000 new homes in the last 3 years alone. It’s expected to average 0.8% per year through 2027, increasing by approximately 12,000 residents. • Meanwhile, our jobs base has also grown as we’ve built millions of square feet of new industrial, commercial, and retail space. • We have nearly recovered all the jobs lost during the pandemic and our job creation rate is still up, having added approximately 5,200 jobs in 2022 alone. Many of these jobs were in the hardest hit industries in the Santa Clarita Valley by the Coronavirus Recession. • The rate of job growth exceeded the rate of population growth. • Industrial vacancy is at zero, but commercial office space is expected to steadily recover. There are millions of square feet of mixed-use space under current construction, already approved, or awaiting approval. • Inflation has likely peaked and should normalize by the end of 2023. While overall growth predicted for this year has been downgraded, and stagflation is a continued concern, a bona fide recession is not likely according to Schniepp.

Last year our economist Dr. Mark Schniepp predicted that, absent some calamity, economic growth and the pace of recovery would remain sustainable, and labor markets would gradually return mostly to their pre-pandemic form. Wage inflation has risen substantially alongside the inflation of many key products and services, both for people switching jobs and those staying in their positions. According to Schniepp, the economy is not really in as bad of shape as things might appear, despite general inflation not being transitory and the introduction of multiple virus variants.

Dr. Schniepp stated how the labor market in 2022 is strong, but there is rising uncertainty that employment will be impacted by a potential recession that could arrive before the year’s end. Santa Clarita Valley residents, however, have returned to the workforce in 2022 and new labor force entrants in 2023 will create more opportunities for companies to fill job positions faster. In fact, we’ve had complete recovery of jobs in those local industries that were hit the hardest by the pandemic, such as hospitality, leisure, entertainment, travel, and more. Rising job counts almost always imply that (1) the demand for production is increasing and firms, therefore, need more capital, labor, or both to meet that demand, or (2) the region is attracting more businesses who employ local workers or a new in-migrating population of workers.

Dr. Schniepp predicts inflation in the US hit its peak in Q2 of 2022 and will continue to decrease to pre-pandemic levels towards the end of 2023. The SCV Labor force is now fully utilized, with job openings exceeding the unemployed. Alongside increased housing production, population growth, and job creation, overall median home selling prices will also increase in the SCV, and office space will gradually fill over the next 2-3 years. Despite industrial availability sitting at zero, there are 10.8 million square feet of commercial/industries space awaiting approval. Projects like Honor Ranch and mixed-use developments in FivePoint’s Valencia will create new opportunities.

There are still many unknowns that will factor into how well our economy will progress: How will the Fed handle interest rates and inflation? Are we in a recession, or is one imminent? But while the overall growth predicted for this year has been downgraded, and stagflation is a continued concern, a bona fide recession is not likely according to Schniepp. Other than that, he sees no other indications of weakness at the local level in SCV. 

Econo Watch

Santa Clarita Valley

Commercial Vacancy Rates Office Space Q3 2022 Q2 2022 Q3 2022 Sq Ft

20.37% 18.95% 2,882,170 Industrial Space 1.30% 1.40% 25,327,073 Total Marked Sq. Ft. Vacancy Percentage: 28,209,243 Office Space - as a % of Vacancy 10.22% 9.97% N/A Industrial Space - as a % of Vacancy 89.78% 90.03% N/A

Building Permits Sep ’22 Aug ‘22 Sep ’21

New Commercial/Industrial Building Permits 1 6 8 Commercial Tenent Improvements/Alterations 26 26 25 Unemployment Rates Sep ’22 Aug ‘22 % Change Santa Clarita 3.9% 4.3% -9.30% Palmdale 6.5% 6.9% -5.8% Lancaster 6.7% 7.0% -4.29% Glendale 4.3% 4.7% -8.51% Los Angeles County 4.5% 4.9% -8.16% State 3.9% 4.1% -4.88%

Housing Stats SCV Average Home Price SCV Average Condo Price SCV Home Sales Aug ’22 Jul ‘22 Aug ’21

998,800 886,300 843,000 889,000 562,500 837,000 1,628 1,477 2,273 SCV Condo Sales 649 597 506.7 SCV Avg. # of Days on Market (SF) 29 55 22 SCV Single Family Home Inventory 343 384 242

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