As the Los Angeles economy rebounds from a rough year and a half of uncertainty we see new hope, new obstacles and yet more uncertainty.  With the collapse of many giant companies and an excess of available retail real estate we are seeing foreign companies that have had success in the recent past taking a chance in the US market.  As these new companies bring their goods to the Los Angeles market we see the potential for new jobs and increased consumer spending.  The entertainment industry appears to be picking the pace up now that the strikes they have faced for the last two years appear to be behind them opening the potential for more jobs and more studio spending which makes up a large portion of the LA economy.  While we are seeing these great improvements we are also dealing with new obstacles such as a water shortage.  With California financially strapped the ability to purchase out of state water is not as easy, we have been forced to reduce consumption and water our lawns on certain days and hours.  There appears to be a lot of change going on in the LA area, but what we are unsure of is what is really changing and if it is for the better or worse.  Unemployment remains higher than in recent history, real estate appears to have leveled out, the state of California can’t balance their budget and the average business man is unsure if they should grow their business or shut it down.  The bottom line is don’t give up.  The economy is turning around, even if it is slower than you may have hoped for.

Living in California definitely has its perks, but the high tax rates is not making it easy to survive in this tough economic time.  California not only has the highest state income tax rate but has recently raised taxes in many other areas to make up for a state budget deficit.

The sales tax has already increased and is scheduled to go up again in a few months.  While many businesses are struggling to sell their products and increase in sales tax is not helping any struggling business.  While you may think this only stretches as far as the California border the effect stretches across the entire country.  California residents are thinking twice about purchasing a new car or buying new furniture.  Major purchases of all types are being put off for a time when the economy and the cost is more justifiable.  Businesses that have been struggling to sell their products or services are now forced to cut sales prices to make up for the difference that the state in now taking.  Now go the next step, landlords are hearing that tenants are operating failing businesses and need rent reductions or are going out of business.  The effects go on and on from one industry to another. 

If your business has been effected by these recent changes or you have lost your job due to the rough economy in California then make your unhappiness heard.  Write the big guy in Sacramento and let him know your feelings.  California needs new leadership as the promises of a better California have ended up broken.

In a recent article from the Wall Street Journal the slow down in the economy and the halt in lending has stalled the revival of Downtown Los Angeles.  As many developers have committed to rebuilding the historic core of Los Angeles the lending arm of our economy has shown its reservations.  Land and buildings have been purchased, time and money has been spent on plans, the local government has worked with developers all in an effort to rebuild the downtown area.  L.A. Live has set the groundwork for downtown to be a destination and a home for all of those in Los Angeles.  These improvements would not only financially benefit the city and its residents but also help the environment.  Less reliance on self transportation and more on mass transit, a central business district for the city and more.  While the banks are getting bailed out by our government they are not passing on the good will.  The money being given to these financial institutions should be passing through to businesses to reinvigorate our economy.  We all need to work together to get out of this depression.

A noticeable shift in the mindset of lessees has come to the forefront as demand increases for options in short term leases with the possibility of an out clause if the business looses a major client or is forced to file bankruptcy.  Given the current global economic conditions and all the uncertainty associated with it, business owners are justifiably apprehensive about locking themselves and their business into rigid lease terms. Leasing office space with a flexible term would allow a tenant to adapt based on the ever changing requirements of the business.  Many landlords have been forced to change their policies for renting space based on these changing needs of their clients.  A recent shift towards these terms within the commercial loft realm has been noticeable. While the concept of live work lofts has become trendy, many are now experiencing first hand how practical they can also be. In these times, the ability to roll rent to live and rent to work in one lease term can prove to be financially prudent for business owners. This urban concept allows these owners to cut down on costs significantly. While many are trying to determine how they can afford to balance car payments, residential rents or mortgages and business expenses; flexible terms and situations have become essential. Commercial lofts give the tenant a potential tax write off and because many of these spaces are in urban centers, a car may become a superfluous luxury. That eliminates the costs of gas, insurance, registration and parking.  Most businesses have transitory properties in that they rarely remain the same size for long. Successful ones grow and we all know what happens to the other kind. Flexible lease terms aid the latter and for both; loft space affords the business owner with the ability to grow or contract as needed. High ceilings and multi-levels allow the tenant to be creative with use of space. When the walls will simply no longer accommodate the business, the walls must come down. Many loft building owners allow tenants to tear down walls to combine units, eliminating the need for tenants to continually relocate, which aside from being a hassle can prove to be quite costly as well.For a business that may be floundering, there is always the possibility of dividing the space in such a way that enables the tenant to sublease part of their space to another small business. Some lofts are even being designed as modular so that walls can be moved easily and efficiently to best use the space according to the needs of the ever changing businesses. In many of these loft developments tenants also have the ability to network and even at times barter services. In these uncertain times, networking and bartering are becoming crucial for survival. A skill, a talent or a business focus can prove to be as valuable as money these days—especially when money seems quite hard to come by.

As the new budget is making its way to the ballot we all need to prepare for the reality that as expensive as it is to live in Los Angeles or in California overall it is about to get more expensive.  Looking back we only have ourselves to blame.  Several years ago we took Grey Davis out of office to replace him with the Terminator.  The main reason many fought to remove Davis was due to an increase in the vehicle registration tax.  Now look at where we are a few years later.  The state budget only has more probelms and that car tax we brought Arnold in to repeal is now coming back with additional taxes including an increase in the sales tax.  I am only left to wonder how different this would have been had we stayed with Grey Davis and his plan to correct the California budget crisis.  While many across the United States are on the verge of losing their homes and have lost a great amount in the stock market this increase in taxes is only going to weaken the already crippled economy.  It is time we start to realize that it is going to be a long time before this economy comes back to a healthy level and that we should think twice before ousting a politician.