LOS ANGELES-Developers, capital sources and other commercial real estate professionals are optimistic that fundamentals will catch up with fast-rising prices, an Allen Matkins/UCLA Anderson survey of those commercial real estate sources shows. The survey “provides clues to current commercial real estate asset prices and a turnaround in the market,” according to an introduction to the survey results.

The Allen Matkins/UCLA Anderson report on the survey notes that, over the past 18 months class A commercial real estate values have increased to near peak levels. “The increase is not supported by the current rental and occupancy rates. This rise in asset prices is either an indicator of investor expectations of improving fundamentals over the next three to four years or the beginning of a new asset bubble,” the introduction says.

The survey found developer optimism increasing in major markets in California with respect to both vacancies and rents, an improvement that would, at least in part, justify higher asset prices. On a regional basis the survey showed the San Francisco and Silicon Valley office markets as the most likely to be the first to turn the corner with new commercial construction (watch a video on the Bay Area office market), with Los Angeles and San Diego not far behind. It reports an expected improvement in industrial markets correlated with the pattern of growth in manufacturing and particularly in Silicon Valley and Orange County.