Possible Resurgence in California’s Inland Empire Interests Agents

By | April 3, 2013

Known as “the 909,” or “the IE” by Southern Californians, terms sometimes intended as a slight, the sprawling desert area east of Los Angeles was a boomtown for commercial and residential development before the recession hit.

But when the economy sank, foreclosure rates skyrocketed and commercial development nearly ground to a halt, and the IE or Inland Empire became one of the worse suffering areas in the region for a number of years. Several projects still sit partially developed, and many existing buildings remain vacant.

At one point in 2012, the Inland Empire metropolitan area – Riverside, San Bernardino, Ontario – made the list of top five cities with the most homes in foreclosure in the nation. That was just a year ago that there were one-in-213 homes in the area in some stage of foreclosure, according to RealtyTrac.

Now, some economists and insurance agents feel the area’s economy is getting back on track.

Edgewood Partners Insurance Center announced Monday it’s planting a flag in the area. Following the acquisition of Ontario’s Homeplace Insurance Brokers Inc. in January, EPIC is now formally launching its Inland Empire division, under the leadership of Managing Principal Dan Ryan. It makes EPIC’s ninth office in California.

Among the drivers of EPIC’S bold push into the Inland Empire is solid construction numbers.

“What we are seeing is it’s starting to pick up, both in construction, which we do quite a bit of, and it’s starting to improve in the wholesale distribution and light manufacturing areas,” Ryan said.

From what Ryan and his associates have seen, construction accounts in the Inland Empire have been heading positive for some time, business permits are up, housing starts are up and commercial starts are up.

A purchasing managers index survey issued on Monday by the Institute of Applied Research housed at Cal State University San Bernardino backs that optimism for the Inland Empire.

The PMI was 59.7 for March, up from February’s 53.7, marking the third consecutive month the number has remained above the 50 percent benchmark, according to the report.

“Since it takes three months to establish a new trend, we can now say that the manufacturing sector in back in growth mode,” the report’s authors state.

March’s Production Index of 63.9 registered a sharp increase from the previous month’s 55 index number, while the New Orders Index rose to 63.9 from 56.7. The Employment Index remained above 50 for the second month, increasing from to 59.7 from 53.3 the prior month, the report shows.

“In summary, this report signals a change in direction of the manufacturing sector and indicates that the local economy is continuing to grow,” the report’s authors state. “All indicators in this report look solid and appear to portend future consumer purchases and an improving economy.”

An economic forecast in February from the Los Angeles Economic Development Corp., which closely tracks the economy for the entire state, shows the Inland Empire and Orange County leading Southern California in labor market gains.

Construction jobs in California are expected to surge over the next two years, growing by 4.4 percent in 2013 and 8.7 percent next year, while the Inland Empire is set to see more rapid job growth in the next year on top of the roughly 20,000 jobs added to the area’s economy over the last two years, according to the report. The report states that construction jobs are expected to have grown another 6 percent in the Inland Empire by the end of 2013.

“Economic growth in the Inland Empire demonstrated consistent strength throughout 2012 as a result of encouraging job growth, particularly over the second half of the year,” the LAEDC report states. “The outlook for the regional economy has improved due to gains in the labor market along with renewed optimism in housing, construction, and manufacturing.”

Despite the good news the area still gives cause for skepticism, and there are those who believe the upticks in business activity are far from what can be considered a broad-based recovery.

Anyone watching events unfold within the limits of one of the Inland Empire’s largest cities, San Bernardino, may agree things aren’t looking up everywhere in the desert region.

San Bernardino and Stockton are two California cities that have grabbed headlines lately because they filed for bankruptcy. A federal court ruling on Monday allowed Stockton’s bankruptcy case to move forward. Stockton tried cost-cutting measures and for years attempted to negotiate with creditors before declaring insolvency.

San Bernardino on the other hand declared a fiscal emergency and stopped paying its debts. According to an editorial in the Inland Valley Daily Bulletin newspaper, without bankruptcy protection the city’s residents face the loss of municipal services.

The editorial argues San Bernardino should get the same bankruptcy protection as afforded Stockton. “It won’t be able to provide needed – even bare-bones – municipal services for its residents without bankruptcy protection,” the editorial states.

Dennis Ferguson, vice president, Kessler Alair Insurance Services, which has offices in Upland and Rancho Cucamonga, offered some constrained optimism on business recovery in the Inland Empire.

“There is a lot of talk of the positive indicators out this direction, and we do have some clients who have probably had some growth year-over-year,” he said.

One of the agents he works with who writes coverage for residential construction contractors reported recent improvement, Ferguson said, adding, “after three years of the phone not ringing, she’s had residential things pop up.”

However, his assessment of any Inland Empire recovery is that “it’s far from broad-based.”

Many of the companies his firm deals with that have been around for decades continue to struggle, he said.

“It’s still very, very challenging,” he added.

An area south of the Ontario Airport was eyed for years for development thanks to promises that air service would increase to the outlying airport as the region’s population grew and travelers began to look for alternatives to the overcrowded Los Angles International and John Wayne airports.

When the recession hit people left their homes when they got upside-down on their mortgages, and developers cooled on hot development areas like those near the airport. Large empty fields, or fields with concrete pads poured and nothing more, are not uncommon to the area.

Ferguson, who started in the insurance business in the 1980s in San Bernardino before a big development push in the 1990s began, was with a client on a sight-seeing trip near the airport on Tuesday.

“There’s a lot of empty parking lots out there again,” he said.

Before it began to rapidly develop in the 1990s and early 2000s, the Inland Empire had its share of detractors, many of those were people who scoffed at the area’s remoteness, its desert climate and landscape, the lack of amenities and things to do, as well as it being a considerable driving distance from Los Angeles and more populous regions.

For some time it has been a well-known regional joke to poke fun at someone whose contact information contains the area code for the region by referring to their place of residence as “the 909,” or by its abbreviation, “the IE.”

However, there is the possible resurgence in business activity, and the region has its strong points. Those seeking an affordable home would have trouble finding a better deal. The statewide median home price for February was $333,880, according to a report from the California Association of Realtors. The median home price in the Inland Empire was $212,300, and home prices are up 23 percent in the area from a year ago, according to CAR.

Ryan, who has lived in the Inland Empire for more than 30 years, was quick to note another strong point for “the IE.”

Business owners and operators in the Inland Empire take pride in the area and they tend to prefer to deal with others who live or work in the Inland Empire, and share their business values, he said.

“It can be quite provincial. It can be proprietary at times,” Ryan said. “It’s a place where a handshake means a lot, and your word is your bond. There’s a certain roll-your-sleeves-up mentality.”

Topics California Agencies Aviation Construction Manufacturing

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