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Dick Turpin

L. A. to Lead Non-Residential Pace

May 04, 1986|DICK TURPIN | Times Real Estate Editor

While the real estate spotlight has been on highly active sales and refinancing of homes lately, Los Angeles is expected to retain its nationwide pace-setting role in non-residential construction for the third consecutive year.

Dollar volume in commercial and industrial construction will reach the $3.87-billion mark this year, up by 3.5% from last year's $3.74 billion. The city started its fast pace in 1984 with $3.21 billion.

Among the states, California will lead the nation in total non-residential construction, according to the Chicago Title Insurance Co., national title insurer, because it has seven of the country's hottest realty markets--Standard Metropolitan Statistical Areas Los Angeles, San Francisco, San Jose, Anaheim, Riverside-San Bernardino, San Diego and Sacramento.

Los Angeles will lead in the categories of new office construction, additions and alterations but will trail in industrial and retail store construction.

All of the nation's non-residential construction this year is expected to increase only by a slight margin, from $71.4 billion in 1985 to $71.7 billon, the title company predicted.

Ranking behind Los Angeles will be the Dallas-Fort Worth market, with $2.98 billion; Chicago, with $1.93 billion; San Francisco, with $1.92 billion and New York City, with $1.61 billion.

Surprisingly, Detroit is expected to lead the field in industrial construction--mostly in replacement and renovation of properties in the so-called Rust Belt--to the tune of $460 million, just ahead of Los Angeles' $450 billion. Phoenix is expected to have $310 million, San Jose, $290 million, and Riverside-San Bernardino, $260 million.

Again, such figures show the strength and continuing depth of construction activity in the Southwest, particularly in California. Construction activity has peaked in Texas and Florida, Chicago Title says, relying on U. S. Department of Commerce figures. Meanwhile, New York, Pennsylvania and Massachusetts are enjoying an upswing of activity.

Los Angeles will produce about $1.19 billion in office construction this year, the forecast says, followed by New York City, with $920 million; Dallas-Fort Worth, with $810 million; Washington, with $750 million, and the San Francisco-Bay Area, with $735 million.

In the category of additions and alterations, Los Angeles will top the field with $1.02 billion. This work will include rehabilitation of existing structures. Chicago, San Francisco, Dallas-Fort Worth and Baltimore will be the other leaders.

In retail construction, Dallas-Fort Worth is predicted as the leader with a sum of $960 million. Los Angeles will be the runner-up with $490 million, while Houston, with $360 million; Phoenix, with $310 million, and Washington, with $300 million, will be among the most active.

Among the nation's top 45 market areas, the title company predicted that New York City will enjoy the greatest increase--12.8%--in activity over 1985, followed by Nashville with 10.7%, and Indianapolis with 10.3%. Biggest losers are expected to be Memphis, with 46.4%, and Orlando, with 31.8%.

Looking back, all office, industrial and retail construction nationwide reached the near-record level of 1 billion square feet in 1985, adds Robert Dunham, president of Newport Economics Group. The high mark in such construction was 1.1 billion square feet, produced in 1979.

For this year, he expects a 10% decline in construction, down to the level of 900 million square feet, citing high vacancy rates in office and research and development projects.

While recognizing that office space is generally overbuilt in most metropolitan areas, he believes there are opportunities for construction of low-rise projects in selected locations. Overall, he anticipates the decline in commercial and industrial development will continue through mid-1987 with an upturn thereafter as vacancies decline.

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