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LOS ANGELES—Robust job growth coupled with increased consumer confidence is fueling the construction demand for commercial office space, multifamily housing projects, and additional industrial warehousing space through 2017 in six major California markets. That is according to the latest outlook from 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.”
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% indicated they would begin a development in the next 12 months as compared to only 35% 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.
Click here to learn more in an exclusive video on the subject.
Multifamily Market: Sitting Pretty on the San Francisco Bay
With employment growth steadily increasing in California, housing demand is creating an increase in multifamily housing development, says the survey. The San Francisco panel had the highest level of optimism regarding vacancy rates, rental rates and the overall multifamily 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 multifamily construction projects over the next 12 months.
Industrial and Warehouse Space: Space Needed for Imports and Product Storage
Signs of a recovering US 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% of the panelists planning to begin new projects during the next 12 months.
Click here to learn more in an exclusive video on the subject.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
