CALIFORNIA BUILDING SEES SURGE; '98 GAINS MAY FADE OVER NEXT 2 YEARS.

Byline: Gregory J. Wilcox Daily News Staff Writer

Construction activity in California soared 13.6 percent during the first 10 months of the year, but the next two years are likely to see growth in the low single digits as the economy cools, an industry tracker said Friday.

January-October activity (excluding public buildings), measured by permits issued through planning departments statewide, amounted to $37.07 billion, according to the report compiled by the Construction Industry Research Council based in Burbank.

The 1998 gain includes two major office projects that received permits in October - Dole Food Co.'s new $31.2 million headquarters in Westlake Village and a $32 million, 10-story office building in Burbank for The Walt Disney Co.

The board said nonresidential building for the past 10 months totals $12.6 billion, up 20.8 percent from the year-ago period, and is expected to reach nearly $15 billion for the year.

This year's impressive growth should continue during the last two months and push 1998's total project value up 16 percent or 17 percent from 1997, but the gains in the next two years will likely be a more modest 3.8 percent, according to Ben Bartolotto, the board's research director.

The latter figure still represents a respectable level of building, he said.

The construction sector's rebound began in 1996, when projects' value jumped 16 percent from 1995. In 1997, it jumped 24.7 percent.

Part of the coming slowdown is being attributed to the Asian economic turmoil and a typical business cycle.

``You tend to get a larger increase toward the beginning of the recovery than you do toward the end,'' Bartolotto said.

Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said the anticipated slowdown reflects a more conservative stance being taken now by lenders.

``They will finance if it is a good project, but if it is a project that might look a little bit marginal, there may be a risk premium in the interest rate and that might kill it,'' he said.

Nevertheless, the Los Angeles area still will see its share of big construction projects in the next couple of years.

Work on the Alameda Corridor to speed shipment of goods between port and downtown rail yards will pick up steam next year; Disney Concert Hall construction should start; the Cathedral of our Lady of the Angels is also planned; and Universal Studios will continue expanding CityWalk.

``(People) are spending a lot of money and there are projects that are not going to be stopped. The construction activity will be a support for the economy for the next couple of years,'' Kyser said.

Housing also made significant gains between January and October with permits issued for 105,357 units, up 11.6 percent from the 1997 period. But California currently ranks third among the states in total new housing units.

California last led the nation in 1991 and 1990, when it accounted for nearly 15 percent of the nation's total, but its activity declined significantly during the recession. Kyser noted that the state's new housing sector is unlikely to surge in the coming years.

``We don't think that new home building in Los Angeles and Orange County is going to go anywhere because of a lack of available sites and fiscalization. Cities would rather have retail development as opposed to new residential development,'' he said.

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CHART: CONSTRUCTION SOARS 

California's non-residential building is up 20.8 percent so far this year, and is expected to near $15 billion.