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The Summer 2024 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey reveals that a majority of California’s commercial real estate industry participants (71%) anticipate distress levels to rise in the coming months, with 53% predicting that new development will decrease over the next three years.
New office development has come to a halt across the state and panelists expect they will be required to hold more equity in their projects over the next three years, but there is cautious optimism for vacancy rates in existing space. Among the Northern California panelists, only 5% of developers are planning to begin new office space development in the next 12 months but the three-year forecast for vacancy rates has improved. In Southern California, panelists believe that their markets are unlikely to get much worse over the next three years. Allen Matkins’ Erin Murphy, partner and chair, Los Angeles Real Estate Practice and Anthony Burney, partner and chair, San Francisco Real Estate Practice, dive into the outlook for the office sector as part of the Summer 2024 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey.
The Summer 2024 Survey panelists are optimistic overall about the future of retail space markets. Throughout the state, approximately half of the panelists have new projects planned for the next 12 months, and slightly less than half began new projects in the previous 12 months. Brian Michel, partner at Allen Matkins and Evan Kantor, head of Kennedy Wilson’s Commercial Investment Group share their thoughts on the factors that continue to help drive the rebound in the retail market as part of the Summer 2024 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey.
As industrial comes off a strong run of development in recent years, 59% of respondents to the Summer 2024 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey believe that supply and demand will balance out, with demand exceeding supply again by 2027. The return of traffic at California’s seaports and continuing high consumption levels are also contributing to more positive sentiment. Any pessimism centers around rental rates and vacancy rates being no better than today, which is not pessimism in the usual sense. Both the percentage of panelists that started new projects during the last 12 months and the percentage planning to begin new projects over the next 12 have declined, which seems to be a reflection of normalizing developer activity. Aly Shivji, Partner at Allen Matkins, and Evan Kantor, Head of Kennedy Wilson’s Commercial Investment Group, explore these and other factors seen to be influencing the industrial space markets.
Following a tempered Winter outlook, Summer 2024 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey panelists see multifamily housing poised for growth over the next few years, as slowed development influences demand and vacancy rates. Increased home prices and increased rental rates in California, as well as new laws easing some of the regulatory burden for developers, are reflected in the panelists’ optimism. While fewer panelists are planning new multifamily development than this time last year, the number is higher than compared to Winter 2024. Kitty Wallace, Senior Executive Vice President, Colliers International and Tim Hutter, Partner, Allen Matkins, discuss what the next three years for this sector of the California commercial real estate market.
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