Economic Impact of Rate Hike Would Spread Across Sector

Sweeping changes are in store as the era of bargain-basement interest rates comes to an end.

Many economists now expect rates to start rising as early as this summer amid signs of job growth and inflation. Interest rates affect myriad real estate-related industries here, including housing, mortgage lending and the buying and selling of commercial properties.

For three years, low rates have been a boon to those industries. They have swelled their payrolls and made executives rich. The housing market itself encompasses countless companies from homebuilders, realtors and construction companies to furniture makers, tile and carpet manufacturers.

Conventional wisdom on interest rates has changed in the past few weeks as mounting data show the U.S. economy is heating up. The first big news hit when the Labor Department said the nation added 308,000 jobs in March, versus a year earlier. Economists expected 123,000 new jobs.

Such data could put the squeeze on the Federal Reserve Bank to raise its market-moving federal funds rate this year from its current 1 percent. Still, the region is far from doomed, since a rise in interest rates should accompany a stronger economy, said Esmael Adibi, director of Chapman University’s A. Gary Anderson Center for Economic Research.

Economists, real estate analysts, and homebuilders interviewed said higher rates should cool the local housing market, where in Orange County the median price reached a record $485,000 in March, up 23 percent from a year earlier, according to San Diego-based market tracker DataQuick Information Systems.

While not predicting a decline in prices, they said the years of double-digit gains are over. “Our market is strong and so supply-constrained, we are not in any kind of a bubble,” said Michelle Wolkoys, managing director of Costa Mesa-based The Meyers Group, which tracks new-home sales.

But the fate of the housing market next year and beyond is unclear, according to Adibi. He said much depends on how much and how quickly rates rise.

Other industries will likely be impacted by rising rates.

Mortgage companies benefited from the craze in home loan refinancing that peaked last summer when mortgage rates hit rock bottom. But in the face of falling demand, several mortgage companies, as well as title companies, already have cut staff.

Low interest rates also have influenced much of the activity in commercial real estate. Low rates helped landlords hold on to their properties despite a decline in occupancy after the leasing market tanked in 2001, brokers said.

Although many landlords were left with big blocks of empty space, especially in high-rise office buildings, they refinanced debt and lowered their mortgages in much the same way homeowners have done.

Orange County Business Journal

Hawaiian Transplant

Roy’s restaurant has just inked a deal to open the first of four Los Angeles area eateries in Woodland Hills.

Roy’s, a posh and pricey dining spot, is well known both to those who have vacationed in Hawaii and those who follow the celebrity chef circuit.

Its founder and chef Roy Yamaguchi, who appears nationally on PBS, has won numerous awards including mention in Conde Nast Traveler’s Top 50 restaurants. He’s also been featured in “My Country, My Kitchen,” a TV Food Network program, and he has published two cookbooks.

Yamaguchi actually began his career in Los Angeles, working at Michael’s in Santa Monica, and for a time in 1984 operated his own restaurant here, 385 North, before opening his first Roy’s in Honolulu in 1988.

Roy’s Hawaiian fusion cuisine, featuring such dishes as Hawaiian Style Misoyaki Butterfish (miso seared butterfish with Chinese five spice butter sauce), is served at 30 restaurants in 21 states, but the inroads in Southern California have been limited to the Orange County, San Diego and Palm Springs areas.

Thanks to some additional investment capital from Outback Steakhouse Inc., which has financial partnerships with several restaurants, Roy’s is now expanding in the Los Angeles area.

The company inked a deal for about 7,000 square feet at 6355 Topanga Canyon, said Brian Forster of TOLD Partners, who represented the landlords, Topanga & Victory; Partners LP and TOIBB Enterprises.

The 10-year lease is valued at $2 million. Roy’s was represented by Irwin Hyman of NAI Capital Commercial.

Company officials said they have been scouring the area for all four locations, and the Woodland Hills deal was the first one to close.

They are close to signing a lease in Pasadena and hope to complete deals on the Westside (perhaps Beverly Hills or Santa Monica) and South Bay soon. The company is also considering a downtown L.A. location.

San Fernando Valley Business Journal

Big Box Deal

Developers of the former theater site at Van Nuys Boulevard and Millbank Avenue in Sherman Oaks struck a deal that will put a big box store on the property.

Best Buy Co. will be constructing a 56,000-square-foot store on the former site of AMC Theatres, which closed down last year.

The store, which will contain about 45,000 square feet of usable space, will be constructed on two stories, one street level and one below street level, said Ira Handelman, a land use, government and community relations consultant who is working with the developers.

Handelman said the project is in compliance with the Ventura Boulevard Specific Plan, which governs the property, and requires no variances to move forward.

The retailer will also build a parking structure, with two levels above ground and one below ground.

Meetings have already begun with city officials and the community, which had initially expressed concern over the idea of a big box development.

San Fernando Valley Business Journal