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A Nordstrom Rack is planned to open next spring at The Shops at River Walk in Bakersfield.

ZUMA Wire

Like a patient regaining strength after rehabilitation, 2014 may well be the year Kern County learns whether its economy can thrive without strong support from the oil industry.

It was the impetus of high barrel prices, after all, that propelled many local businesses through the Great Recession, earning Bakersfield a place among California's fastest-growing cities over the past five years.

But the roughly 50 percent drop in oil prices since July is already rippling through the local economy, delaying and in some cases canceling commercial development projects. And that's without the widespread layoffs people in the industry warn lie ahead.

Despite this, people in diverse sectors of the local economy are voicing optimism that businesses here will do fine, or at worst, slow only moderately. There is a sense momentum is on Kern's side.

"The economy's doing pretty good right now," said John Emery, dean of Cal State Bakersfield's School of Business and Public Administration. "We're doing better than we thought we were."

Observers point to bright spots in logistics, agriculture and tourism, none of which depends directly on strength in the oil business. At the same time, pending and ongoing construction projects will give the local economy a bump.

Industrial growth

Two new industrial parks are expected to come online in 2015, fueled by increasing distribution and warehousing activity.

CrossRoads Business Park is scheduled to open early next year on 80 acres near Harris Road and Young Street. Toward the end of the year, the 138-acre Landings Logistics Center is expected to open at Merle Haggard Drive and Wings Way.

The projects will make their debut at a time of rising rents driven by new construction, said Wayne Kress, an industrial real estate specialist at Cushman & Wakefield in Bakersfield. All told, the area's building inventory will expand by a whopping 1 million square feet in 2015, he said.

Building surge

New construction from housing development is also poised to take off. On top of several large, single-family home projects unveiled in Bakersfield in 2014, Castle & Cooke announced Highgate at Seven Oaks, a 443-acre development southwest of Ming Avenue and Allen Road.

Company marketing and sales executive Darlene Mohlke said Highgate, divided into three distinct communities, will carry on Castle & Cooke's signature style.

"We are extremely positive about the 2015 outlook and know our community has supported our private, gated communities in the past and will continue to do so in the future," she wrote in an email.

Meanwhile, the company is finishing work on 120,000 square feet of new retail space around town. Tenants including Nordstrom Rack and Sprouts Farmers Market are scheduled to open in early 2015.

Residential outlook

The city's underlying single-family home market may not be the juggernaut it was in 2013, but people in the industry say there's room for growth in 2015.

Appraiser and local market commenter Gary Crabtree said he expects to see Bakersfield home price appreciation -- in the early part of the year, at least -- roughly equal to 2014's 6 percent. That paled in comparison with 2013's 21 percent.

He said declining sales, profit taking by investors and mixed lending conditions will make 2015 "a year of small, diminished growth and stable to very slightly increasing housing prices."

Broker Scott Tobias was also cautious but somewhat more upbeat, saying a sales slowdown will push Bakersfield toward a "normal market" that balances buyers and sellers better than in recent years. He cited pent-up demand among young buyers as a reason for optimism.

"The interesting part of this is I believe there are a lot more individuals that could get the financing but just don't know it," he said. "It is our job to help those individuals because, based on current interest rates, it is often cheaper to buy than to rent."

Commercial real estate

The outlook for Bakersfield's office market is less sunny. Oil prices have become a chief concern in that segment, and with good reason.

A large energy company had been looking for up to 100,000 square feet of local office space, and narrowed its search to four possible locations as it prepared to sign a lease next March. But it cited the drop in oil prices as a reason for putting the project on hold a few weeks ago, Cushman & Wakefield's Jeffrey Andrew said.

He cited other deals that appear to have been scuttled amid the oil downturn. One involved a mid-size energy company that wanted to buy or build 50,000 square feet of office space. Another project, by Chevron, would have expanded the company's local presence by 150,000 square feet.

Overall, Andrew expects to see office rents level off and possibly decline in 2015, depending on the fortunes of the oil industry, which he said is the largest user of office space in Bakersfield.

Office broker Mark Smith, with Newmark Grubb ASU & Associates, echoed Andrew's caution. He estimated plummeting oil prices have prompted developers to shelve some 350,000 square feet of local office space.

But he also predicted continued growth in health care and financial services, and said new developments related to those industries will break ground in summer and fall.

Tourism comeback

Kern's hospitality-related businesses, which benefit from strength in oil but also draw upon a wider regional base, are looking forward to continuing improvement.

The manager of Bakersfield's convention and visitors bureau, David Lyman, said construction will begin on new hotel rooms in 2015, thanks to a "vibrant" outlook mirroring national trends.

He credited a healthier snowpack in the Sierra Nevada for expectations of more rafting, fishing and other outdoor activities that attract visitors to Kern. Lower gasoline prices will also bring more people to the county in 2015, he said, as will large conventions and sporting events.

Local banking

While local banks have fared well in recent years, oil is as big a concern for them as it is for other industries.

Mission Bank President and CEO A.J. Antongiovanni said his institution did well in 2014, with loans up more than 10 percent and expectations for a helpful increase in interest rates.

He said the Bakersfield-based bank has benefited from strength in agriculture, where growers able to secure water supply amid the drought are enjoying generally strong commodity prices.

But like others whose business depends to some degree on a healthy oil industry, Antongiovanni is watching barrel prices warily.

"Our outlook is, this (oil decline) is the most significant event to monitor," he wrote in an email. "Clearly we are in an early stage of a downturn. The anticipation is the 2015 impact will be significant, but the severity is still unknown at the present time."

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