EDR Insight’s Market Confidence Index: Orange County and LA

66% of local due diligence consultants characterize the Orange County metro as a growing market, and a slightly lower 55% for the LA metro—“picking up over the last couple of years.”

We closed out EDR’s fall Due Diligence at Dawn tour covering three West Coast cities, starting with our event December 6th in Orange County. Below is the summary of how area environmental professionals view the southern California market, clients’ attitudes toward risk, top challenges and the near-term forecast.

What Makes Southern California Unique?

Here are a few trends working in favor of the Orange County and LA due diligence markets:

  • Orange County has seen double-digit construction job gains in the past year.
  • LA ranks 5th in the US for overall real estate prospects, and Orange County is not far behind in 8th place, according to the Urban Land Institute/PricewaterhouseCoopers Emerging Trends in Commercial Real Estate report
  • Foreign investors are very comfortable in southern California’s market.
  • The local economy benefits from strong financial services and technology sectors, which both support higher wage job growth and a robust housing market.
  • A trained workforce is driving new startups in software, medical device and biotechnology.

The EDR ScoreKeeper 3Q16 report shows that LA and Orange County Phase I ESA volume have been relatively flat year on year, although it is worth noting that 2015 was the most robust year the commercial real estate market has seen since the downturn. California has more metros in the Top 50 Markets for Phase I ESAs in the U.S. than any other state with a total of eight. Los Angeles ranks as the 2nd largest Phase I ESA market in the U.S., and Orange County the 20th. In both metros, 3Q16 activity was down compared to the 3rd quarter of 2015, but not in any significant way. In just a few weeks, we will see how the fourth quarter shapes up.

The results of our Orange County/Los Angeles Market Confidence Survey, conducted the week prior to DDD characterize the market as follows:

  • 66 percent of area EPs are experiencing a growth market in Orange County, and a slightly lower 55 percent in LA.

“Picking up over the last couple of years after a slow period.”

  • Commercial real estate lenders and investors remain risk averse.
  • Clients are equally sensitive to Phase I ESA pricing and turnaround time.
  • Intense competitive, and pressures on pricing and report delivery time are the top challenges.

Area EPs who voiced challenges dealing with pressure to lower their fees or deliver reports quickly can take solace in the results of a Globe St. survey that asked investors, brokers, lenders and developers earlier this fall what qualities they look for when selecting an environmental consulting firm. The results showed that:

  • a firm’s technical qualifications (59%) and a sound national reputation (45%) were among the most desirable traits.
  • very few respondents felt price (2%) or even turnaround time (16%) were as important.

The Outlook

Consultants are fairly confident about the market outlook, ranking Orange County and LA almost equally around 3.5 on a scale from 1=very pessimistic to 5=very optimistic.

EDR Insight would like to thank all of our Orange County and LA area consultants who participated in the survey.

The Market Confidence Index for Oakland/San Francisco and Seattle will be published shortly.