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Good '87 Seen for Developers Who Avoid Some Areas

October 17, 1986|GREG LUCAS | Times Staff Writer

Developers in Orange County can expect business to remain good in 1987--much as it has been this year--as long as they stay away from apartments, research and development complexes and several areas of the county that are in the doldrums, market forecasters for the Newport Economics Group said Thursday.

On the commercial development side of the business, the market for high-rise office space will remain fairly stable, with the countywide vacancy rate remaining at about 20% despite a slight decline in construction of new buildings, according to Maureen Ayers, a researcher for the Newport Beach-based market forecasting firm.

The best opportunities for commercial developers will be in industrial projects, particularly multi-tenant complexes, Kenton Boettcher, a senior associate at the company, said.

He added that industrial space will continue to be in high demand--4 million to 5 million square feet was absorbed this year--but at the expense of research and development-oriented commercial projects. Demand for larger buildings already is so low, he said, that existing R&D complexes in some parts of the county are expected to maintain sizable vacancy rates for up to three or four years.

In the residential arena, analysts for Newport--in presenting its annual preview of the coming year's economic trends--predicted that housing starts in Southern California, after increasing 10% this year--will drop back to 1985 levels next year. The company said it expects to see 150,000 residential building permits issued in Orange, Los Angeles, Riverside and San Bernardino counties in 1987, a 10% decline from this year.

The weak spot is construction of new rental housing, which was off 50% this year in Orange County--and should stay low in 1987--because of reduced depreciation allowances in the new federal tax law.

But Ayers said the news on the residential front still is good because the anticipated declines will merely turn a great 1986 into a very good 1987.

New homes "were selling like crazy" this year in Orange County--propelled by high sales in the county's planned communities. That level of demand for homes, she said, would carry into 1987, thanks to continuing low interest rates.

The southern part of the county was rated best for all types of commercial construction by Boettcher, who rated central Orange County as the second best locale on his list.

He said builders of all types of commercial structures should be cautious in the western part of the county; he added that he considered the north county good for industrial developers, but he added that the area around John Wayne Airport is overbuilt.

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