LOS ANGELES--(BUSINESS WIRE)--Robust job growth coupled with increased consumer confidence is fueling the construction demand for commercial office space, multi-family housing projects, and additional industrial warehousing space through 2017 in six major California markets. This outlook is based on the most recent Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey. The Survey results are leading indicators of future commercial construction in California. An analysis of the three-year outlook for real estate development activity provides insights into new, not yet on the radar, building projects.
“The forecast is optimistic for commercial real estate once again, and is expected to remain solid for the next few years,” says Jerry Nickelsburg, adjunct professor of economics at UCLA Anderson School of Management and senior economist with UCLA Anderson Forecast. “Developer sentiment in general is buoyed by a recovering economy, job market growth and increased imports through California ports.”
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View a graphic overview of developer sentiment by market here.
Commercial Office Space: Still Hot for Developers
In comparison to the last survey, conducted in May 2014, Southern California developers now are more bullish than in previous years. Forty-seven percent of panelists stated that they began projects in the last 12 months. Looking forward 51 percent indicated they would begin a development in the next 12 months as compared to only 35 percent in the May 2014 Survey.
The San Francisco Bay Area panel agreed that office space demand, though growing at a significant rate, is no longer out-pacing construction. That panel also forecasts a potential easing on rental rates. Development momentum has shifted to the East Bay, as the expensive rental rates in San Francisco proper push some companies across the Bay.
Multi-family Market: Sitting Pretty on the San Francisco Bay
With employment growth steadily increasing in California, housing demand is creating an increase in multi-family housing development. The San Francisco panel had the highest level of optimism regarding vacancy rates, rental rates and the overall multi-family market.
Higher rents and occupancy rates reflect better returns, which is expected to stimulate multi-family construction in 2016 and beyond. While more units are expected to be delivered in 2015, developers do not anticipate an increase in the number of multi-family construction projects over the next 12 months.
Industrial and Warehouse Space: Space Needed for Imports and Product Storage
Signs of a recovering U.S. economy have led to increased consumer confidence and spending during the second half of 2014. Imports from Asia and Mexico through California ports of entry are on the rise. At the same time many brick and mortar retailers have experienced an increased amount of online purchases, prompting a need for more storage and distribution space. As a result, positive sentiment continues for manufacturing and warehousing space markets, with 70 percent of the panelists planning to begin new projects during the next 12 months.
About the Surveys
The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey 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, in 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 200 attorneys in four major metropolitan areas of California: Los Angeles, Orange County, San Diego and San Francisco. The firm's areas of focus include real estate, construction, land use, environmental and natural resources; corporate and securities, real estate and commercial finance, bankruptcy, restructurings and creditors' rights, joint ventures and tax; labor, employment and OSHA; and trials, litigation, risk management and alternative dispute resolution in all of these areas. 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 at www.uclaforecast.com.
About UCLA Anderson School of Management
UCLA Anderson School of Management is among the leading business schools in the world, with faculty members globally renowned for their teaching excellence and research in advancing management thinking. Located in Los Angeles, gateway to the growing economies of Latin America and Asia and a city that personifies innovation in a diverse range of endeavors, UCLA Anderson's 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 embody the school's Think In The Next ethos. Annually, some 1,800 students are trained to be global leaders seeking the business models and community solutions of tomorrow.