January 30, 2013
Allen Matkins/UCLA Anderson California Commercial Real Estate Survey Shows Developers Optimistic Through Uncertain Times
Developers Project Movement in Multifamily and Industrial Sectors, With Slight Receding Optimism in Office Markets
The latest Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey projecting a three-year outlook for the state's overall commercial real estate industry remains predominately upbeat, with developer sentiment remaining optimistic towards multifamily and industrial asset types and cautiously optimistic toward commercial office markets. The survey was conducted in November 2012 to examine office, industrial and multifamily markets. Video highlights of the report are available here https://www.youtube.com/watch?v=avi7aSwzqXE.
Multifamily Sector Continues to Grow
Following last July's survey projections, multifamily development continues to boom with increased housing demand and decreasing vacancy rates of 4.5 percent in multifamily markets. This turnaround in multifamily residential construction is being driven by high occupancy rates and rising rents, particularly in the Bay Area, as household formation begins to rebound inCalifornia. While new generations entering the workforce are seeking housing closer to work, the survey also shows families leaving single-family homes for multifamily homes.
"Our survey shows that, despite the new projects underway - and there are many of them throughout the state - our panels are very optimistic about what those markets are going to look like three years hence," said Nickelsburg.
Industrial Sector Continues to Grow
Industrial markets had positive forecasts in all regions, due in part to anticipated increases in California exports driving demand for distribution and manufacturing space, particularly from China and other Asian markets. Since 2011, private investment in industrial facilities remains up by about $15 billion. The survey indicates that opportunities for new developments have emerged in the industrial space market - particularly in Inland Empire markets.
Office Development Shows Tension Between Developers and Economic Activity
Industry sentiment for the office sector three years out, while still optimistic, shifted downward from six months ago. This, however, may reflect developers' concerns over the looming fiscal cliff, as the survey was taken in November 2012. Projects coming out of the ground, as well as those in the pipeline, could prove forecasters wrong in 2013 and beyond.
"We are still seeing strength in the market today. More developers have been taking notice that market conditions now justify demolishing older structures, and taking steps to build new ones," said John Tipton, Real Estate Department Partner at Allen Matkins. "This is a very significant indication of commitment, not only of capital, but to the strength of the development cycle."
Many developers remain optimistic that a number of new large office developments remain ready to enter the market, and that demand is still very much alive in San Francisco, Los Angeles, and particularly in San Diego's North County.
"The sheer scale of some existing portfolios that will likely come to market in 2013, like that of Blackstone's EOP Trust, could be influential in keeping the commercial real estate investment market forward-moving," said Tony Natsis, Real Estate Department Chairman at Allen Matkins. Based on the survey's aggregate results, California's real estate market will remain bullish through 2015.
About the Survey
For a copy of the latest Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index Research Project, please visit www.allenmatkins.com or www.uclaforecast.com.
The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index Research Project polled 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 incipient activity by commercial real estate developers. To achieve this goal, the panel looks at the markets three years in the future, and building conditions over the three-year period. The survey was initiated by Allen Matkins and the UCLA Anderson Forecast in 2006, furtherance of their interest in improving the quality of current information and forecasts of commercial real estate.
About Allen Matkins
Allen Matkins, founded in 1977, is a California-based law firm with approximately 220 attorneys in four major metropolitan areas of California: Los Angeles, San Francisco, Orange County and San Diego. The firm's core specialties include real estate, real estate and commercial finance, bankruptcy and creditors' rights, construction, land use, natural resources, environmental, corporate and securities, intellectual property, joint ventures, taxation, employment and labor law, and dispute resolution and litigation in all these matters. For more than 35 years, Allen Matkins has helped clients turn opportunity and challenge into success by providing practical advice, innovative solutions and valuable business opportunities. When clients' challenges require experienced trial counsel, Allen Matkins has a proven track record of successful litigation before juries, judges and arbitrators. Allen Matkins is located on the Web at www.allenmatkins.com.
About UCLA Anderson Forecast
UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state's rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://www.uclaforecast.com.
About UCLA Anderson School of Management
UCLA Anderson School of Management is among the leading business schools in the world. UCLA Anderson faculty members are globally renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides a distinctive approach to management education to more than 1,800 students enrolled in its MBA, Fully-Employed MBA, Executive MBA, Global Executive MBA for Asia Pacific, Global Executive MBA for the Americas, Master of Financial Engineering, doctoral and executive education programs. Combining selective admissions, varied and innovative learning programs, and a worldwide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.
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