Coastal cities: still optimistic after all those layoffs.

Coastal Cities: Still optimistic after all those layoffs

Along the coast from Venice to Long Beach the economy is still strong and diversified, despite the current round of aerospace and defense job cuts, economists and local government and business leaders claim.

The region boasts a large, educated and affluent labor pool with an estimated population of about 1.4 million, according to the latest data available from the Southern California Association of Governments.

Unfortunately for the South Bay, the current flood of aerospace and defense pink slips for many of these highly skilled employees has still not subsided. After cuts at Northrop Corp., Lockheed Corp. and Douglas Aircraft during the first six months of this year, local officials are now concerned about new threats.

TRW Inc.'s Redondo Beach-headquartered Space and Defense Sector may cut 200 to 300 jobs during the second half of 1990. In addition, the U.S. Air Force is considering relocating the Space Systems Division in El Segundo and its 3,200 jobs to another state.

The division's closure would be felt throughout the region and could lead to another round of layoffs at South Bay aerospace firms. Just across from the base is the Aerospace Corp. with 4,000 employees who rely on Air Force contracts for their livelihood. Plus, the exodus of Air Force personnel and civilian workers would hurt retailers, real estate companies and service sector industries.

But all is not doom and gloom because the region's economy is still growing, said Dennis Macheski, vice president and regional director of research at real estate brokerage firm Grubb & Ellis Co.

Macheski pointed out that the rate of economic growth in the South Bay and along the coastal cities may have slowed in 1989, but it was still a positive one.

For example, the South Bay economy created 81,000 positions in professional services, financial services, diversified manufacturing and retail sectors in 1989. This is still "good growth," said Macheski, and over 1 percent higher than the national average. He also said there was more growth at small- to medium-sized firms than large corporations.

Torrance Mayor Katy Geissert noted that the aerospace cutbacks will affect her city's economy and may lead to a decline in home and automobile purchases. But she does not think the slowdown will be "disastrous to Torrance's economy because of its diversity."

South Bay and coastal cities were strong performers in retail and automobile sales because of large shopping centers such as the Del Amo Fashion Mall in Torrance and numerous auto dealers in the region.

Torrance expects to earn $25.5 million in sales taxes for the fiscal year 1989-1990, which is approximately 30 percent of the city's operating budget, according to the city finance department.

In the real estate market, tenants are absorbing commercial office space at a 3 percent rate, which is slightly less than downtown Los Angeles' 5 percent and Orange County's 8 percent rates, Macheski said.

However, the regional office vacancy rate has decreased over 6 percent during the last 12 months to 17 percent, said Macheski. He said the area has absorbed 297,000 square feet of office space during the first half of 1990. Lease rates, which range from $19 to $24 per square foot annually, have attracted tenants tired of paying high Westside and downtown Los Angeles rates, he added.

The region also benefits from the 1.44 million cargo containers imported and exported through the Port of Los Angeles in San Pedro in 1989 and 1.17 million worth of cargo-container activity at the Port of Long Beach. Because of the port, "demand for warehousing and distribution buildings remains strong as the region emerges as the distribution hub for most of the West Coast, said Dick Bentley, senior vice president and district manager of Grubb & Ellis' South Bay office.

Many of the distribution and warehousing facilities were built on former manufacturing plants that moved out of the area or closed. Strict Air Quality Management District regulations have forced companies such as the former Johns Manville in Carson, AZKO in Torrance, Honeywell in Gardena and Great Lakes Carbon in Wilmington to relocate or shut down. Many other companies have retained their corporate headquarters in the area, but have moved their manufacturing operations to other parts of the county or out of the country entirely.

Mayor Geissert said the City of Torrance has helped developers convert sites that housed steel mills into warehousing and industrial buildings by creating a redevelopment district. San Diego development company Gascon Mar Ltd. built a 47-acre Torrance Center in the area after Torrance spent millions for a toxic cleanup.

Real estate in the region also got a boost from several well-performing area companies that recently purchased entire South Bay office buildings. Japanese automakers Nissan, Toyota and Lexus bought office buildings in Torrance along the 190th Street Corridor.

Toy maker Mattel Inc., with 1,500 local employees and $1.34 billion in revenues, just purchased a 320,000-square-foot, 14-story office building and an adjacent warehouse facility in El Segundo. The company will relocate its corporate headquarters from its current Hawthorne site.

A South Bay location, said Mattel senior vice president Jack Sage, allows the company to "draw employees from all over the Los Angeles basin" because of the central locale and freeway access. Drawing from a large pool of workers, the company succeeded in hiring a diverse group of workers.

"It's not a melting pot, but more like tossed salad," Sage said describing the Mattel workforce.

Mattel employees are also looking forward to shorter commuting times three to four years from now with the opening of the Century Freeway and the start of light rail Green Line service along the freeway's median.

Area residential real estate has also slowed from the rapid pace of the 1980s. Median home prices average $450,000, but prices have declined slightly in the past year. Rental rates for apartments and duplexes begin in the $700 to $800 range.

Sage said that one disadvantage of a South Bay locale for employers is the high cost of housing. The high housing costs make it difficult for the company to hire workers from the Midwest and other parts of the country and relocate them to the region. Though Sage added, "there is lots of good talent in the area" and the company does not have to hire outside of the region frequently.

Many communities in the South Bay, including Redondo Beach, Manhattan Beach, Palos Verdes and San Pedro, are still primarily bedroom communities for Los Angeles professionals and executives.

But many entrepreneurs founded companies close to their South Bay or coastal city homes to keep commuting times short. For example, Merisel -- an El Segundo based computer software and hardware distributor -- was founded by co-chairman Robert Leff and David Wagman i the garage of Leff's Mar Vista home with a $1,300 initial investment. The company is now the 44th largest Los Angeles County public company with $629.4 million annual revenues.

To market to the many executives who live in the San Pedro and Palos Verdes area, Crain Wiberg, leasing agent for the new 275,000-square-foot Pacific Place office building in San Pedro, sent fliers to homes in the Palos Verdes Peninsula. Wiberg was hoping to convince executives to move their offices closer to home.

Although Wiberg didn't snag the building's largest tenant, Logicon Inc., from anywhere -- the company was already in the region -- he did convince executive and Palos Verdes resident Ronald Hill to move his company, Aviation Insurance Services, from Mid-Wilshire to San Pedro.

PHOTO : Flying low: Locale reels from economic turbulence