|
|
|
|
|
|
|
|
Construction slump costs SoCal $29 billion The construction business is tough. So we figured we’d check in with Rich Lambros, outgoing CEO of the Building Industry Association of Southern California that represents 2,000-plus members in all aspects of the building industry. We figured he’d have an opinion of what’s next! Us: What's the general condition of the region’s building industries? How bleak is it … Rich: This year has been a challenging year for our industry. The Southern California region is forecast to pull about 19,700 building permits for both single-family and multi-family residential construction. The good news is that it is up 30% from last year’s record low of 15,130 permits. But that is about as good as the news gets. This year will clearly cement itself as our region’s second worst year for residential construction. Us: Homebuilders are likely tied to the overall economy … we’ve seen bits of good news, like success Irvine Co. has enjoyed in Irvine. How soon can builders get back to significant building? Rich: As you well know, it is all tied to an improvement in job creation, average household income and consumer confidence, and there doesn’t appear to be any quick, short-term fixes for those challenges. It will likely take a combination of renewed economic confidence and significant improvement in the key economic indicators before we see a return to substantial housing production within our region. After going through this recession we have certainly learned that the entrepreneurial spirit that clearly defines our great state will be a contributing factor towards our future economic success. The Irvine Company has taken the lead in this regard and had a very successful new housing program this year, with 680 home sales in Irvine. The Irvine Company’s Woodbury and Woodbury East projects reminds us that homes built with innovative design, appropriate price point and placed in a highly desirable location are sought after by new home buyers even in an extremely difficult market. Us: Non-residential construction has a large government component. You have any sense if infrastructure purse strings will seriously reopen and help construction trade? Rich: Unfortunately, it does not appear that infrastructure construction will get better in the short term. Fact is, some forecasts are predicting a 25% to 35% reduction in public works construction in 2011. Although our industry continues to make the case to elected and appointed government bodies that infrastructure construction is one of the best investments government can make – especially at this time – we have been disappointed with the results so far. Us: Probably 1-in-5 construction workers are out of work – and without jobs for some time. Anything novel being done for them around the industry? Rich: Our industry has been in recession for three years now. A number of programs have been deployed to help our construction work force during this time, but given the severity and the depth of this recession, we believe the best use of our resources is to advocate for the initiatives, policies and programs that will reignite our regional economy and restart the building industry. Us: Do you think the downturn will eventually make it easier to build in the region? Will government ease regulation to encourage growth? Rich: That’s a hard question to answer, because government, like real estate, tends to go through cycles. So long term, it’s hard to tell if the lessons learned from this downturn will stick. But right now, yes, government (especially cities and counties) miss the tremendous revenues and infrastructure improvements our industry had been providing them in recent years. They want that back and many local governments are working with us to try and figure out how to stimulate building activity. What is certainly troubling is what we are seeing from other sectors of government – especially some of our state regulatory bodies. Recently, the California Air Resources Board (CARB) was setting greenhouse gas reduction targets for land use under the new law SB 375. The California Chamber and over 50 other business and industry groups from around the state expressed their support for reasonable and achievable greenhouse gas reductions, but warned against setting the targets at unreasonably high levels given our fragile economy. Despite the warning, the California Air Resources Board voted to adopt greenhouse gas targets for land use at levels considered by the business community to be unreasonable – levels which could result in $9 per gallon gasoline and new taxes on commuters for each vehicle mile traveled. This is not the kind of measure which stimulates our economy – it is the kind of measure that drives businesses from California. Us: What’s the downturn taught the region’s construction business? Rich: The most important lesson from “The Great Recession” has been just how important the construction industry is to our local, regional and statewide economy. When you turn off the economic engine of construction, there is an absolute and significant negative impact for this region. The Construction Industry Research Board reported in 2006 that residential construction alone (not counting Commercial or Public Works) contributed almost $40 billion of business activity to our region’s economy. In 2009 – just three years later – the number shrunk to just under $11 billion. That is almost $30 billion of economic activity lost in our region, and demonstrates how construction is an important economic engine that Southern California cannot afford to shut off. Us: Because of this market, we are told that there are changes occurring at the Building Industry Association of Southern California as well … can you tell us about those? Rich: We anticipate that the building industry will look and feel different in the coming market recovery than it has in the past and the changes will likely be lasting ones. Considering this, for some time now the BIA has been looking at how we can continue to evolve and stay relevant to our members and to make sure that the BIA is positioned to strongly represent this industry as we transition into recovery and beyond. While we have discussed these issues over the course of the past two years, it is clear that the time for change is now, so we have initiated a strategic change discussion with our leaders and members. That process is now in full swing and we have dynamic ideas on the table regarding how the BIA will be structured to insure our continued strength and effectiveness. After carefully considering my role in this strategic change process, I recently announced that I plan to step down as the CEO of BIASC when the process is completed at the end of the year. I believe that if the organization is going to have an honest, healthy discussion about our future structure, then our BIASC leaders must know that I am providing them the sort of objective analysis that comes from a CEO who does not have any personal stake attached to the ultimate structural decisions of our Board. This is not to say that I am leaving during this critical change discussion; quite to the contrary, I will be managing it. What is clear from this process so far is that the BIA will not only be around for the recovery, but will help lead it and will be stronger than ever. This is essential, not just for the homebuilding industry, but for the overall economic strength of our state. Source Jonathan Lansner |
|