Impact of Job Cuts Varies Throughout Region

LOS ANGELES-The latest round of financial industry job cuts—some 52,000 by Citigroup and a combined nearly 4,000 by Goldman Sachs and HSBC Bank—may hurt the Greater L.A. area less than other regions of the country, and Orange County may already have absorbed its worst blow. Those are some of the conclusions by reports that assess the impact of job losses on the office market and comments by CRE professionals who follow the Southern California market.

The Los Angeles office market in general has suffered far fewer layoffs than New York City and other more finance-related CBDs in terms of office jobs lost, according to a report by Milwaukee-based Robert W. Baird & Co., which points out that the payroll cuts in the financial services industry have not been distributed evenly throughout the country but have been concentrated in markets with high concentrations of financial services firms. In Southern California, that has meant a severe blow to the Orange County office market, where the once high-flying subprime mortgage firms like now-defunct New Century Financial Corp. once filled huge spaces that have since been vacated.

Nelson Rising, president and CEO of Los Angeles-based Maguire Properties, revisited the difference between the L.A. and Orange County office markets recently at the annual Nareit conference in San Diego. Rising pointed out that occupancy remains high in Downtown L.A.’s class A office space, which is not dependent on the types of firms that undermined the Orange County market. And in remarks recently during the L.A.-based REIT’s earnings conference call, Rising pointed out that Maguire—which is the dominant owner of class A space in the L.A. CBD—feels “quite comfortable” with its position with respect to tenants in the financial services industry. Rising, noting that Maguire has fielded many questions regarding its potential exposure from tenants in the financial service and insurance industries, said that the REIT’s three largest banking tenants are Wells Fargo with almost 400,000 square feet, Bank of America with 190,000 square feet and US Bank with 162,000 square feet. All of those tenants “have weathered the financial storm quite well,” the Maguire CEO said.