After reading Bill Sendelback’s distorted article, “Tough Times in SoCal,” in the July 2014 issue of Hearth & Home, the following points are obvious: 1) Bill does not live in Southern California and probably didn’t visit the area when he wrote the article; 2) Bill did not talk to enough successful specialty retailers in Southern California whose businesses are booming.
And why are savvy specialty retailers prospering in the current economic SoCal business climate? Because the economy is in a strong recovery mode, resulting in job growth, rising home prices, and even robust retail sales in some sectors. But Bill claims that business is down in “SoCal” due to what he calls a “poor economy, a severe decline in the value of homes, and anemic new home construction”–all of which couldn’t be further from the truth!
According to Moody’s Analytics, California currently leads all states in job gains. One could argue that a state (like California) that lost the most jobs during the recession would experience the greatest gains as it climbs out of the hole, but if you study the type of growth that’s occurring, it also reveals that the housing sector is expanding here faster than other regions of the country. In Orange County, the unemployment rate stands at 5.0%. This compares with an unadjusted unemployment rate of 7.3% for California and 6.3% for the nation during the same period.
Obviously, this is great news for Southern California retailers and manufacturers. One in every eight new jobs created in California since the start of 2013 is in construction. In Orange County, construction accounted for nearly a third of all new jobs. The Associated General Contractors of America reported last month that Los Angeles and Orange counties ranked first and third among U.S. metro areas in April in creating new construction jobs. Construction workers are coming to Southern California in droves to find work. And homebuyers are snatching up new homes in Irvine, San Juan Capistrano, and other areas in south Orange County, not to mention other communities in SoCal.
House prices in most regions of SoCal have grown dramatically over the past couple of years. My unimpressive tract home in Huntington Beach would fetch $100,000+ more this summer than last summer. Five of my neighbors sold houses during the past year for more than the asking price after receiving multiple bids. The average price of a new KB Home ordered in California in the three months that ended May 31, 2014 was $591,000, up 18% from a year earlier. And home buyers are lining up to buy these houses. SoCal is also drawing a large amount of Chinese investment as that country’s real estate bubble continues to deflate and investors seek safe havens for their money. Irvine, Los Angeles, and San Francisco are the three largest markets for this new market niche.
And yes, Anaheim Patio & Fireside did close in Orange County, but what Bill failed to mention is that one of its shuttered stores was replaced by an exciting new business, Backyard Expressions in Huntington Beach, which has experienced strong sales since it opened its doors on Father’s Day 2014, under the ownership of Bill Montgomery (a 35+-year veteran of the casual furniture/grill/fireplace industry) and his daughter, Angela Rolish. Many other SoCal retailers are thriving as well, such as Fireplace & Patio Trends in Orange, Roger’s Gardens in Newport Beach, Patioworld (4 locations in Southern California), and Today’s Patio in San Diego. The trendy Costa Mesa-based South Coast Collection (which houses locally owned home products businesses) has grown steadily and high-end manufacturer Brown Jordan opened its first direct-to-consumer showroom here a year ago. Furthermore, Wilshire Fireplace did not close its doors, as Bill states in his article. With a new ownership structure, Wilshire & Okell’s Fireplace Shops is a healthy 6-store enterprise with strong reviews on Yelp.
Even the dated and dowdy Del Amo Fashion Center in Torrance, California (located near the Patio & Hearth Products Report offices) is in the middle of a $200 million renovation that includes a new Nordstrom as an anchor store.
It’s true that regulatory actions in California have impacted the sale of hearth products in Southern California, but the drought and unusually warm weather during the past few years are having a much greater impact on fireplace sales. The first six months of 2014 were the hottest January-through-June period on record in California, representing nearly five degrees warmer than the 20th century averages. I bought a RH Peterson log set three years ago and have probably used it only a handful of times, not because the flames don’t look beautiful, but because it overheats my family room and that’s in the middle of winter without any heat turned on in the house!
Still, many Southern Californians who aren’t buying fireplaces are spending oodles on well-appointed outdoor kitchens, beautiful fire tables, and plush furniture collections. As some of the retailers in Bill’s article point out, the key to being successful in Southern California is being flexible enough to completely understand what types of products customers want to buy. Selling a Sub-Zero refrigerator to an Eskimo is probably as silly as selling a wood-burning fireplace to a Southern Californian.
I have lived in Southern California for 26 years, after living 29 years in the Midwest. I raised a family here in Southern California while struggling through two recessions. In terms of the present, I am optimistic about where things are going with our local economy. I am also confident that SoCal specialty retailers who sell outdoor-living and hearth products should continue to do well, as long as they have the ability to adapt to a changing marketplace. But then again, that’s a recipe for success regardless of the geography.
Carol Daus is the editor of Patio and Hearth Products Report.