Antelope Valley Land Appreciation
and Regional Economic Analysis 2012
Presented to:
CalChoice Investments
Presented by:
Sevada I. Hemelians
Antelope Valley Land Appreciation
and Regional Economic Analysis 2012
Table of Contents
Antelope Valley Land Appreciation
I.
Introduction .. ............................................. 1
II.
Background .. ............................................. 2
III.
Study Parameters and Methodology .. .................... 3
IV.
Results .. .................................................. 4
V.
Regional Economic Analysis .. ........................... 5
Population................................................. 6
Employment.. ............................................. 7
Residential and Non-Residential Development........... 8
VI.
Current and Future Trends to Watch.. .................... 10
VII.
Author . .................................................. 14
VIII.
Sponsor .................................................. 14
I. Introduction
The Greater Antelope Valley
has been synonymous with rapid
growth; an ability to attract new
commerce and industry with a pro
business attitude and foster new
development due to an abundance
of land and natural resources. The
Antelope Valley has abundant land,
the majority with utilities in place
positioning the area for further
growth. There is an ample supply of
water in the region and any
development in the region over the
years has been conducted as a result
of master planning for streets, roads,
sewers and all infrastructure needs.
An overall favorable
economic environment has resulted
in ancillary benefits to the region,
particularly an increase in the value
of raw land in the Antelope Valley. Despite the most recent economic
slowdown, a study to determine the
overall appreciation rate of land over
the span of 17 years was conducted
by SIH Ventures. Additionally, an
analysis of the regional economics
of the Greater Antelope Valley is
provided to determine the strength
of the region in both historical
results as well as future forecasts.
Highlights of this detailed analysis is
contained herein.
An Example
of development
in the
Antelope Valley
within a six
year period.
Regional Economic Analysis
2012
1
II. Background
Having weathered the boom and
bust cycles of previous decades, the
Antelope Valley experienced
unprecedented growth during the
past decade. With an average
annual job growth rate of over 6
percent, the Antelope Valley has
benefited from various industries
including aerospace, agriculture,
manufacturing and retail trade sectors.
For years the addition of the
Antelope Valley Enterprise Zone,
a State income tax incentive
designation that allows businesses to
take advantage of tax savings by
hiring within the region, generated
tremendous economic development
activity. While numerous businesses
have already been advantaged by the
Enterprise Zone, the renewal process
is currently underway to ensure
2
Antelope Valley Land Appreciation
future companies enjoy a similar
benefit. Additionally being
designated with a Foreign Trade
Zone (FTZ) offers international
traders, importers, and exporters
outstanding opportunities to take
advantage of special customs
privileges. These incentives can
lower barriers to trade, improve cash
flow, and reduce or eliminate duty
rates for goods.
Economically, the region has
benefited from many growth
industries and as the economic
recovery resumes, the fundamental
key factors that resulted in the
growth of the Antelope Valley
will once again continue.
III. Study Parameters and Methodology
• Analyzed land sales from 1994 –April 2012.
• Evaluated data from the Greater Antelope Valley Multiple
Listing Service (MLS) sales records for all properties with
Assessors Parcel Number (APN) starting with “3”. We used only
actual sales data and discarded active, pending or expired listings.
• From 9,856 sale transactions, 886 valid repeat sales of property were
found. After deleting properties with less than a one year hold period,
697 properties remained. Repeat sale means the property was sold at
least twice in the period, once to establish value and start date, and a
second time to establish the increase/decrease in value and time period.
• Used geometric (compounding) averaging methodology.
• Parcels were held for various periods of time, normalized
by comparing on appreciation per year basis.
• Each sale was given equal weight in percentage increase
averaging––not adjusted for size, land value, or number of times
land was sold in period. Exclusions:
• Property held less than 1-year––unrealistically high mathematical rates of return.
• Subdivision sales––could not verify how many parcels were divided and sold
from original parcel APN.
• Errors within MLS––called brokers to verify when obvious aberrations were
encountered (Example: land sold for $1).
• Multiple parcel transactions––occurrences where multiple parcels in close
proximity were purchased by an individual at markedly different prices
(usually for tax reasons) were excluded.
Regional Economic Analysis
2012
3
IV. Results:
Rates take into account returns less the standard rate of commission per transaction*:
Antelope Valley - All Land
Average Property Annual Appreciation Rate = 30%
Median Property Annual Appreciation Rate = 20%
Antelope Valley Land - deleting top and bottom 10% of properties:
Average Property Annual Appreciation Rate = 24%
Average Hold Period 3.7 Years
* Commissions vary by individual sale; a commission rate of 6% was used for this analysis.
4
Antelope Valley Land Appreciation
V. Regional Economic Analysis
The Antelope Valley is an
extensive economic region
encompassing over 3,000 square
miles that include 5 incorporated
cities and portions of Los Angeles
and Kern counties. The Antelope
Valley provides a fertile environment
for economic growth by attracting
hundreds of new businesses on an
annual basis and offers a business
friendly climate through various
public and private partnerships.
The region offers reduced business
taxes and offers more incentives for
businesses to expand via designated
Enterprise and Foreign Trade Zones.
Historically the region has
benefited from positive economic
conditions and regional resources
and as a result the region has
experienced strong growth patterns.
While the recent economic downturn
has taken a toll on the region as in
other locations across the nation, it
is anticipated that as the U.S.
economic recovery gains momentum,
the Antelope Valley region
will capitalize on its fundamental
strengths and position itself for
positive gains in the mid to longer
term forecast period.
Signs of a turnaround can been
seen in the Antelope Valley. Retail is
up the past two years and there has
been job growth.
Regional Economic Analysis
2012
5
Population
After years of strong
population growth, a slowdown
in new home construction and the
weakened job market contributed to
a slowed population growth during
the 2009–2010 period in Antelope
Valley. During the peak expansion
years, the combination of a more af-
fordable housing inventory and
a growing labor force were
contributing factors to the net
in-migration in the region. As the
overall economic conditions
improve, population growth will
return to a pace similar to its
previous peak. Antelope Valley Population Forecast
32.7% h
•
2010
•
2020
•
1,000,000
59.8% h
2035
500,000
Source: Southern California Association of Governments, Kern County Council of Governments
6
Antelope Valley Land Appreciation
Additional long-term forecasts
provided by SCAG and Kern COG
indicate that population levels will
increase in the Greater Antelope
Valley to over 737,778 people by
2020 with the highest concentrations
occurring in Lancaster and
Palmdale. Revised long term
numbers reflect a stronger pace of
population growth. These numbers
reflect an increase of greater than
32% of the population recorded in
2010 within a ten year period.
Over 35 percent of the
population in the Antelope Valley
is under 20 years of age and the
school age population will increase
over the predicted future. Eighteen
percent of the population is between
21 and 34, one of the faster growing
cohorts in the Northern portion of
Los Angeles County increasing by
over 20 percent by 2015.
The 55 to 64 age population is
the fastest growing cohort in the
Antelope Valley. It is predicted that
this cohort will grow annually by
30 percent by 2015. As a result of
this increasing cohort, healthcare
and leisure related services will
continue to rise in the region.
Employment
As the U.S. recovery continues, an economic chain of
events will occur. Consumer confidence and spending will
rise, businesses will continue to invest in future growth, and
industrial activity will accelerate. In 2010, Real GDP grew 3.0
percent and its forecast to grow between 3.4 to 4.0 percent in the
next few years. This is a pace that is sufficient to induce hiring
and in turn reduce the unemployment rate.
Firms are poised to hire more aggressively, and job creation
is expanding. Many firms realize their earning and future growth
opportunities lie in the fundamental business principles of
seeking new revenue opportunities and these require greater
investments in both equipment and labor force. Job growth in the Antelope Valley is currently at 1.3 percent annually,
and will grow to 2.8 percent during the next several quarters.
Higher paying jobs in the professional services, information and technology and healthcare sectors, as well as
professional services, will contribute to the expanding labor force in this particular region. These jobs generally
provide higher salaries and in conjunction with a more affordable housing inventory and an increase in construction
resuming after 2013, the region will continue to attract people with higher paying salaries.
Regional Economic Analysis
2012
7
Residential and Nonresidential Development
In the six year period from 2005 to 2010, the Antelope Valley had
dominated housing production in Northern Los Angeles County, accounting
for 75 percent of all new housing activity. In 2010, the total percentage of
new housing in the Antelope Valley was 66 percent of all North Los Angeles
County. In the cities of Lancaster and Palmdale specifically, there are over
16,232 approved residential units, of which 696 are currently under
construction. The overall pace of development and delivery of the balance
of projects will return as the pace of home sales in the region increases.
Despite anemic growth that was experienced between 2009 and 2011,
demand and growth in the region reflects the need for over 13,900 new
residential units to be permitted and built in the Antelope Valley during the
period between 2012 and 2017.
The existing housing market will transition from sales that are largely
distressed sales, particularly since 2009, and return to a more conventional
housing market with gradually rising home values in 2013 and beyond.
Commercial and Residential Investment
Much like the struggling economic conditions nationwide and statewide,
the last few years in the Antelope Valley region has seen an impact in the
commercial real estate markets.
While conditions are stabilizing in the Antelope Valley, there is renewed
momentum in leasing activity, as well as strong projections moving forward
as indicated in the following tables reflecting the Historical and Forecast of
residential and nonresidential development in the region.
8
Antelope Valley Land Appreciation
Residential and Nonresidential Development Antelope Valley – Historical and Forecast
Residential Development Permitted
1019
2008
1416
565
2009
528
2010
Source: Building Industry Association 2012
2905
2268
3439
3253
658
Future Projections
382
2011
2012
2013
2014
2015
2016
2017
Residential Sales––Units Sold
5459
2008
6439
4757
2009
2010
Source: Building Industry Association 2012
6563
5524
8031
7488
8650
8264
Future Projections
4282
2011
2012
2013
2014
2015
2016
2017
Commercial and Industrial Investment––Dollars (Millions)
77
2008
25
2009
25
2010
46
2011
61
77
89
108
102
Future Projections
2012
2013
2014
2015
2016
Source: California Economic Report 2012
Regional Economic Analysis
2012
9
VI. Current and Future Trends to Watch
This section of the analysis identifies current and future trends in the region; information that highlights the
strengths and opportunities that make the Antelope Valley a dynamic community for investment.
1. Health Care Resources
Population growth, favorable housing conditions and communities
that cater to the diverse population in the Antelope Valley has resulted
in greater investment in Healthcare resources and facilities.
• Kaiser Permanente has developed and submitted a master plan
for its 44-acre site near Avenue L and 5th Street West. Kaiser plans on
breaking ground on Phase I of its campus in 2012.
• Palmdale Regional Medical Center is a private hospital located in Palmdale, California. This hospital is a 239 bed,
state of the art facility, and cost an estimated U.S. $200 million. Adjacent to the hospital itself are two 60,000-square-foot
medical office towers, called the Palmdale Medical Plaza. The hospital complex will also feature apartment housing for those
who need assisted living. The hospital complex is 34.17 acres.
• The Antelope Valley Hospital is an established 420 bed acute care hospital emphasizing the reliability and
deliverability of healthcare for the greater Antelope Valley region.
2. Water Supply
The District currently receives water from three sources:
Groundwater, Littlerock Dam Reservoir, and imported water from
the State Water Project (SWP). Groundwater is obtained from the
Antelope Valley Groundwater Basin via 25 active wells scattered
throughout the District. The District’s local surface water supply
is from Littlerock Dam Reservoir.
• The District currently does not have recycled water supplies,
yet is in the process of developing the use of non-potable water to
offset potable water demand and to diversify its water supply options.
Additionally, the District is developing new sources of supply via
groundwater banking and anticipated new supplies from transfer and
exchange opportunities. 10
Antelope Valley Land Appreciation
3. Accessibility to Antelope Valley
Nearly 71,000 workers travel into Greater Los Angeles from the AV each day.
• Excellent transportation system in nearby Los Angeles, including the largest port complex in the United
States, an extensive freight and passenger rail infrastructure, numerous airports, and an expansive highway system.
The region is undergoing several transportation infrastructure expansion and improvement plans.
• The California High Speed Rail project will impact the Antelope Valley via direct and indirect economic
benefits, with a planned hub in Palmdale.
• As studies have shown, the state of the current transportation infrastructure in California will not keep up
with the impact of future demand. Continued population and economic growth will place even more demands on
California’s already overburdened mobility systems. According to most recent
estimates by the State, congestion on roads results in $18.7 billion annually in
lost time and wasted fuel.
• With the completion of high-speed rail, California’s drivers will see
significant relief in traffic congestion. High Speed Rail will lead to a reduction
of 320 billion vehicle miles traveled over the next 40 years. That will translate
into 146 million hours saved for Californians each year.
• The AV Line Infrastructure Improvement Strategic Plan, approved early
May 2012, confirmed the Metropolitan Transportaion Authority would upgrade
the tracks running between downtown LA and Lancaster.
Projected Normal Year Water Supply
Water Supply Sources
2010
2015
2020
2025
2030
2035
Groundwater
8,000 12,000 12,000 12,000 12,000 12,000
SWP
9,800 12,800 12,800 12,800 12,800 12,800
Littlerock Dam Reservoir
2,000 4,000 4,000 4,000 4,000 4,000
Recycled Water
0 1,000 3,000 6,000 9,000 12,000
Groundwater Banking
0 2,600 4,100 5,100 8,600 9,600
Anticipated New Sources
0 2,600 4,100 5,100 8,600 9,600
TOTAL
19,800
Source: Palmdale Water District––Urban Water Management Plan
35,000
40,000
45,000
55,000
Regional Economic Analysis
60,000
2012
11
4. Utilities to Support Massive Growth
By the year 2020, California must produce 33 percent of its electricity
with renewable sources, including solar and wind. That mandate has spurred
rapid and unprecedented growth in California’s green energy industries as
companies look to provide clean, renewable energy for California’s more
than 38 million residents.
• The Antelope Valley is one of the lowest-cost places to do business
in Southern California and has an established manufacturing base.
• Antelope Valley has a thriving solar industry—some of the world’s
largest solar projects are planned for the area. In 2011, the California
Energy Commission granted permits for the Palmdale Hybrid Power Plant,
and the first of several Photovoltaic Solar facilities began construction.
• The California Solar Initiative calls for a ten-year $3.3 billion program
that will solidify California’s position as the leading solar technology producer
in the United States, as well as one of the largest solar markets on the globe.
• The Antelope Valley is centrally located to 95 percent of California’s wind-generating capacity and output.
5. Trends Toward Education * (Preschool to College Level)
More than 100,000 K-12 students are educated each day in the Antelope
Valley Region. Antelope Valley educators and leaders are working to build a
strong bi-lingual workforce.
• In recent years, about 17% of the district’s total enrollment
participated in the Gifted and Talented Program.
• Partnered with California State University, Long Beach, to launch a Bachelor of Science Degree Completion
Program, allowing local students to complete four-year degrees in Mechanical or Electrical Engineering to supply
the ongoing need for engineers in the Antelope Valley.
• The University of Antelope Valley, the first native university to the Antelope Valley, offers Associate,
Bachelor’s and Master’s degrees. In addition, there are several major educational institutions with satellite
campuses including, University of Phoenix, University of La Verne, and Chapman University.
12
Antelope Valley Land Appreciation
(*From the 2010 Antelope Valley Labor Market Study)
6. Expanding Business and Industry
The region has committed numerous resources to the expansion and support of small business owners. Partnering
with the Small Business Development Center, the region has instituted training programs, delivering hundreds of hours
to over 150 area businesses and promoted an overall environment of entrepreneurship and business friendly conditions.
• Recent new businesses expanding into the Antelope Valley community include; WalMart, Family Dollar,
Laemmle Theaters, Yard House, 99₵ Only, Guess, Express, Vallarta Supermarket, Kia, Mazda, dd’s Discount and
WSS Shoes as well as an extensive list of other restaurants and retailers.
From the 2010 AV Labor Market Study:
• The labor force in the AV is broken down in the
following sectors and percentages:
• 30% management/professional
• 25% production/agriculture/transportation
• 44% sales/service industries
• 55% traditional “white collar” employees
7. Regional Master Plan for Community and Municipal Infrastructure
The Antelope Valley presents itself as a microcosm of economic activity in the Greater Southern California
region. Historically, job growth, attracting high growth industries and developing communities which can support
population growth, has been the strength of the Antelope Valley.
• Rapid exurban growth has made the Antelope Valley
Freeway one of the most congested in southern California, with
average rush hour speeds well below 20 miles per hour (30 km/h).
Future predictions call for continued growth along the Route 14
corridor, including predictions tripling the population of Palmdale
by 2030. In response, multiple government agencies have
proposed adding more transportation arteries between Los
Angeles and the Antelope Valley, as well expanding the capacity
of the existing Route 14 and rail corridors.
Regional Economic Analysis
2012
13
VII. Author
Sevada Hemelians is an experienced
real estate professional with an active real
estate consulting practice of more than ten
years. Sevada’s experiences include many
positions with private real estate oriented
firms, as well as practical experience with
local and regional government agencies.
The following is a brief summary of his
relevant experience. Prior to starting his own consulting
practice, Sevada Hemelians was director
of marketing and research services of the
Charles Dunn Company. Since joining
the company, Sevada was responsible for
spearheading and enhancing Charles Dunn
Company’s marketing and research
department including the development of
corporate level real estate research,
marketing and technology tools and
special projects, including a Knowledge
Management System, an Intranet site, as
well as a customized enterprise wide
listings database.
In addition to these projects, Sevada
has successfully prepared regional
economic and multifamily forecasts that
have been showcased at the Institute of
Real Estate Management (IREM) Annual
Forecast since 2000. He has conducted
various financial valuation and market
studies for private, public and
institutional clients in various real estate
markets, including Southern California,
Northern California and Arizona.
Prior to joining Charles Dunn
Company, Sevada was an associate with the
Economic Research Associates, Planning
14
Antelope Valley Land Appreciation
Group, where he performed
financial and market assessment,
litigation support, and economic
feasibility studies of urban
entertainment, planning, real estate
projects in Alaska, New Mexico,
California and British Columbia.
He has also held several associate,
planning and analyst positions with the
Metropolitan Transportation Authority
(LACMTA), where he has used
Geographical Information Systems (GIS)
and other advanced forecasting programs
in determination of ridership for the 2020
Long-Range Transportation Plan, as well
as the 1997 Call for Projects.
While working for the City of Glendale
City Manager’s Office, Sevada’s analysis of
post-closure maintenance costs for the City’s
landfill was critical for the adoption of fiscal
policy regarding the real estate economics of
the landfill.
While attending USC, Sevada has
worked with the University of Southern
California Center for Economic
Development, where he has utilized
GIS technology to assist with the
analysis of the Adams Square
Neighborhood Revitalization Plan for the
City of Glendale. He has also conducted
research for the California Building Industry
Association (CBIA) concerning
construction defect litigation of stacked
and attached townhouse and condominium
projects in California.
Sevada obtained a double Masters
Degree in Planning and Development and
Public Administration from the University
of Southern California, where he also earned
a Bachelor of Science Degree in Business
Administration. Sevada is an active member
of many associations including Urban Land
Institute, American Planning Association,
the Real Estate Cyberspace Society, having
achieved the RECS designation, as well as
the local chambers of commerce and real
estate related organizations.
The information contained herein reflects
recent findings and estimates from sources
deemed reliable and trustworthy. All
information should be independently verified.
VIII. Sponsor
This study was sponsored by CalChoice
Investments, whose mission is to
help individuals, families, and
businesses gain and preserve wealth
using the proven time-tested method of
buying land in the path of growth, and
selling for a significant profit in
the future. CalChoice is a principal that
purchases carefully selected
pre-developed real estate.