Despite Economic Uncertainties, Tempered Optimism Prevails for Commercial Real Estate in California, Says Allen Matkins/UCLA Anderson Forecast Summer Survey

Industrial and multi-family housing continues to grow, the office remains stagnant and retail continues a slow comeback

LOS ANGELES, August 3, 2022 /PRNewswire/ — The Allen Matkins/UCLA Anderson Forecast Summer 2022 California commercial real estate study shows there’s a lot more optimism for the next three years than the deluge of negative news about California commercial real estate. economy might suggest. The current survey finds that the optimism displayed in last winter’s survey for office and retail markets turning positive in the near term was premature, but the prevailing sentiment for these markets remains one of confidence. longer term. Meanwhile, optimism for the industrial and multi-family markets remains, albeit at a more muted tone than six months ago.

The half-yearly survey questions a panel of California real estate professionals to project a three-year outlook for California commercial real estate sector and anticipate potential opportunities and challenges affecting the office, multi-family, retail and industrial sectors.

The Allen Matkins/UCLA Anderson Forecast Summer 2022 California Commercial Real Estate Study, infographics and related content are available for download here at August 3, 2022at 2:00 a.m. PST.

Ongoing uncertainty dampens office market sentiment

The continued persistence of the COVID-19 pandemic has reversed the office market’s previously optimistic trajectory as the return to work of many employees continues to be delayed. As investors grow more cautious amid growing uncertainty about the near-term economic outlook, optimism for the office market in the previous survey is turning into a slowdown in Southern Californiawith a more neutral vision in Northern California. Office development sentiment remained mildly optimistic in the Bay Area, although there are no plans in place yet to increase the rate of development. Although the return to the office has been delayed, there are signs that this pessimism is temporary – companies will eventually put plans in place to bring their staff back to the office, and there will eventually be a need for new office development to accommodate this. . new office landscape.

Multi-year optimism continues for a growing industrial market

With industrial markets seeing consistently high occupancy rates and superior rental rate growth over the past few years, sentiment towards new industrial projects has been consistently positive, including in the latest survey. This is largely due to the fact that rapid industrial development has barely kept pace with absorption, leaving high demand for additional supply. Consistently high occupancy rates and superior rental rate growth kept optimism high for all industrial markets. The current survey predicts more or less the same thing – that large future increases in demand will exceed expected and projected supply for 2025. This view of an even tighter market stems in part from the fact that demand in recent years pushed vacancy rates to surprisingly low levels.

Multi-factor fuel (continued)
Multi-family
Market optimism

Despite pandemic-induced demand for suburban housing and an ongoing work-from-home culture, optimism remains for the next three years, albeit down slightly from a year ago. In this survey, rental rates are projected for each market to rise faster than the rate of inflation and vacancy rates to fall by 2025. Although continued waves of the pandemic have delayed some returns to office, the reopening of city amenities, and the creative and social value derived from urban experiences are attractors that should drive the increase in multi-family living in urban areas, especially among young workers.

Two other factors are also driving new multi-family developments – the interior parts of California are experiencing growth in logistics and infrastructure construction and a series of state laws – SB8, SB9 and SB10 – replaced some local building approval processes, opened up land currently zoned for single-family homes to the construction of small multi-family structures, and reduced barriers to multi-family construction in transit corridors.

Retail outlook continues to slowly rebound

Despite a looming recession and lingering economic uncertainty, retail sentiment continues to rebound from the bottom of the cycle. The latest survey indicates optimism in most markets, apart from San Francisco and Los Angeles, where pessimism persists due to the fact that many people continue to work from home and the lack of foreign tourism. In other markets, a limited return to the office has increased demand for retail in the heart of each city, while the construction of new housing in California has created a demand for new businesses near these dwellings. It is also expected that there will be demand for the reconfiguration of retail establishments towards a more open-air post-COVID concept that will attract consumers to the stores. The booming housing market will continue to drive retail demand across the state, leading to a turnaround in retail development and a new round of retail construction that is expected to begin before the end of 2025.

About the survey

The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index surveyed a panel of California real estate professionals in the development and investment markets, on various aspects of the commercial real estate market. The survey is designed to capture the budding business of commercial real estate developers. To achieve this objective, the panel examines the markets in three years and the construction conditions over the three-year period. The survey was initiated by Allen Matkins and the UCLA Anderson Forecast in 2006, in pursuit of their interest in improving the quality of current commercial real estate information and forecasts.

About Allen Matkins

Allen Matkins, founded in 1977, is a Californialaw firm based with over 200 lawyers in four major metropolitan areas of California: Los Angeles, Orange County, San Diegoand San Francisco. The company’s areas of focus include real estate, construction, land use, environment and natural resources; corporate and securities, real estate and commercial financing, bankruptcy, restructuring and creditors’ rights, joint ventures and taxation; labor and employment; and trials, litigation, risk management and alternative dispute resolution in all of these areas. Allen Matkins can be found on the web at www.allenmatkins.com.

About UCLA Anderson Forecast

UCLA Anderson Forecast is one of the most watched and often cited economic outlook for California and the nation and was the only one to predict both the severity of the downturn of the early 1990s California and the strength of the state’s rebound since 1993. The Forecast has been credited as the first major US economic forecasting group to call the 2001 recession and, in March 2020he was the first to declare that the recession caused by the COVID-19 pandemic had already begun. uclaforecast.com

About UCLA Anderson School of Management

UCLA Anderson School of Management is one of the world’s leading business schools, with faculty members recognized globally for their teaching excellence and research in advancing managerial thought. Situated in Los Angelesgateway to the growing economies of Latin America and Asia and a city that personifies innovation across a wide range of activities, UCLA Anderson MBA, Full Employee MBA, Executive MBA, UCLA-NUS Executive MBA, Master of Financial Engineering, Master of Science in Business Analytics, Doctoral and Executive Education programs epitomize the school. Think about the next philosophy. Each year, some 1,800 students are trained to become global leaders in pursuit of tomorrow’s business models and community solutions.
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Media contacts:

Rebecca Trounson (310) 825-1348
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UCLA Anderson School of Management

Paul Feinberg (310) 794-1215
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UCLA Anderson School of Management

Eric Podolski (617) 694-6411
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Allen Matkins Media Relations

SOURCE UCLA Anderson Forecast

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