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Forecast for the Commercial Construction Sector in Los Angeles

September 9, 2017

Are you involved within the commercial construction sector in Los Angeles? 

What is your forecast for future growth? We gathered some facts for your review here.

The US economy is finally stabilizing after the adversities of the Great Recession in 2007.  According to the Bureau of Labor Statistics, the unemployment rate in Los Angeles County was at 5.1% in 2007, and steadily climbed to reach a peak of 13.9% in 2010. In 2016, the unemployment rate was 4.1% which is the lowest it has been since1999. This is a surprising fact because, according to Los Angeles Almanac, since 2007, the residential population has increased from 9,780,808 to 10,241,335 residents. That is roughly 46,053 new residents per year. The major question is why are so many people fleeing to LA County, and how has the unemployment rate still decreased so markedly? The answer relies heavily on one industry; commercial construction.

After a failed economy, commercial construction is one industry that struggles to recover. Commercial construction can range from retail shopping, offices, medical centers, plants, restaurants, and even homes. According to the Los Angeles Economic Development Construction (LAEDC), the Los Angeles regional construction industry employs over 313,000 employees and is planning to generate 95,000 job openings within the next five years. When more people move to a city, one consequence is that more infrastructure is needed in order to support that community.

It makes sense that construction development simultaneously increases with a growing population. Because more people are moving to LA County, there is a high demand for additional housing. LAEDC says that housing affordability continues to be a problem in LA because the cost of living is so high. LAEDC predicts the building at least 100,000 homes per year, many of which will be multi-unit dwellings.

Los Angeles County is one of the most populated and built-up cities in the country. The idea of more people and more buildings seems both insane and impossible, but Los Angeles is the sweet spot for any big or small business that wants to flourish. There are numerous job opportunities in LA. LAEDC says that Los Angeles is huge in technical fields like aerospace, defense, clean technology, research and development, entertainment, fashion, healthcare and tourism. An increase in population, an increase in job opportunities, and a steady decrease in unemployment, can result in more disposable income. The latter offers great business opportunities for retail, restaurants, or any kind of commercial spending, which results in building more infrastructure to support these kinds of businesses as well as additional housing for the employees.

The big infrastructure opportunity LA has is the trading industry. In recent years, the global supply chain has been enormous andLAX International Airport is a world hub for this global supply chain. In addition to air, LA has the “two largest seaports in the Western Hemisphere – Port of Los Angeles and Port of Long Beach,” (Adie Tomer and Joseph Cline, Brookings).  The Port of Los Angeles Cargo Marketing Division states that “the port is committed to maintaining industry-leading facilities and infrastructure…there will be a $2.6 billion investment in infrastructure in the ports in the next 10 years.” The need to stay competitive in the global supply chain industry alone is a huge contribution to the increase in commercial construction. That investment is only in the Port of Los Angeles; it does not include other aspects of the supply chain, like distribution warehouses. The Port of Los Angeles Cargo Marketing Division says the ports produce 1 million California jobs and 3 million nationwide. Not only is the supply chain growth in California assisting the state; it is a huge help to the economy nationwide as well.

The use of technology will also increase the infrastructure growth rate. Architects now have the ability to design 3D buildings on computers and as well as predict energy consumption . This means that future buildings will be energy efficient and more sustainable. However, for every positive, there are negatives. A major problem with Los Angeles is that “environmental legislation might impede economic growth,” (Karen Chapple and Carrie Makarewicz, Access Magazine).

The forecast predictions of future population growth contribute enormously to future infrastructure needs. Regardless of the growing population, California received a D+ on its 2017 Infrastructure Report Card. Road conditions and waste water are costly to the citizens of California. Not to mention, deteriorating bridges, roads and buildings that are badly in need of repair , especially if environmental laws prohibit new infrastructure growth. The most recent winter storm, although great for the drought, could cost California over $1 billion in renovation costs according to Michael Cohen, Gov. Jerry Brown’s finance director. Nevertheless, California needs to act on refurbishing the current infrastructure because it will be more costly in the future, and reconstruction should happen sooner rather than later.

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Angeles, The Port of Los. “The Port of Los Angeles | About the Port.” Port of Los Angeles. N.p., n.d. Web.

“California.” ASCE’s 2017 Infrastructure Report Card. Infrastructure Report Card, n.d. Web.

Chapple, Karen, and Carrie Mackarewicz. “Restricitng New Infrastructure- Bad Business California.” Access Magazine. N.p., n.d. Web.

“Estimated Population of Los Angeles County As of January 1, 1991 – January 1, 2016.” Estimated Population for Los Angeles County, California. N.p., n.d. Web.

“Home.” Los Angeles County Economic Development Corporation. N.p., n.d. Web.

Tomer, Adie and Kane, Joseph. “The Top 10 Metropolitan Port Complexes in the U.S.” Brookings. Brookings, 28 July 2016. Web.

“Unemployment Rate (Not Seasonally Adjusted).” Google. Bureau of Labor Statistics, n.d. Web.