Office Rents Will Likely Drop — But Not Apartment Rents, Survey Finds

Los Angeles Times (July 29, 2020) California office spaces are expected to keep getting emptier and their rent prices will likely keep declining for years as the fallout of the pandemic persists, according to a new survey of commercial real estate developers and financiers. Retail space will take an even more severe hit, while industrial real estate looks like a bright spot, and demand — and rents — for multi-family homes are expected to stay relatively high, said the Allen Matkins/UCLA Anderson Forecast survey, which focuses on expectations of what the next three years will hold for commercial real estate in Southern California and the Bay Area. Survey respondents’ outlook was about as gloomy as in December 2008, “during the height of an implosion of economic activity,” according to the survey’s findings, released Wednesday. John Tipton, a partner in the real estate department of the Allen Matkins law firm, which together with the UCLA Anderson Forecast created the survey, said offices won’t go away completely. “I think that there’s always going to be a need for the office, and it will develop based on the needs of humans,” Tipton said.

And in California’s tight housing market, the market for multi-unit homes is likely to stay strong, the survey found. Three-quarters of respondents in Southern California said their plans in this area hadn’t changed. “It is hard to envision a scenario in which COVID-19 and its fallout could remedy the underlying housing affordability issues that California faced coming into 2020,” Tim Hutter, a partner at Allen Matkins, said in the survey report. “In light of that ongoing concern, we expect demand for multi-family housing to continue to be high.” Read More (subscription may be required)