The survey was conducted after the presidential election; however, Tipton doesn't think that the election played a role in the muted outlook or in developer and investor strategy. “I don't think at this point that the presidential election has any effect on investor sentiment,” he says. “We really hit rock bottom in 2009 and the recovery barely started in 2010, and so we are seven or eight years into recovery, and that is much longer than your typical recovery period. As opposed to a typical V recovery where things come roaring back, this recovery has been anemic. We have never gotten over 2% growth, and in a typical recovery, you are getting 4% growth. It has been a long run in recovery, and naturally, you would think it is petering out.”

While outlook may be starting to soften, Tipton says that we are still in a very healthy market with lots of opportunities, reminding that this specific survey asks professionals to look ahead to 2019, not 2017. “It is not an on-and-off switch, and I think you can generally see that when things aren't frothy anymore and you get to a fully priced market, the answer isn't 'I'm not going to do any real estate transactions anymore,'” Tipton explains. “It is that people get more selective, and people get more focused on location and the land because there is less fluff in the numbers from rent growth.”

Allen Matkins

LOS ANGELES—The California real estate market is softening. According to the Allen Matkins UCLA Anderson Forecast, which GlobeSt.com has obtained exclusively, the market is running up to its peak in the office and multifamily sectors, while the industrial market remained the star of the industry. Even in sectors and markets where investor sentiment remained positive, meaning a showing of 50% or more, the overall sentiment had ticked down compared to the same survey last year. In Los Angeles, for example, sentiment was down in every sector compared to investor sentiment in the previous forecast. The forecast provides a three-year outlook at the market.

While it shouldn't be surprising that the industrial outlook was overwhelmingly positive, the negative multifamily outlook in four of the six markets reviewed was surprising. “The only area where I was surprised was in the multifamily market. If you look at multifamily, San Francisco, the East Bay and Silicon Valley went from being positive to negative, while San Diego went from positive to barely negative and L.A. and Orange County both remain positive but with a decrease in positivity,” John Tipton, an operating partner at Allen Matkins, tells GlobeSt.com. “That also showed up in developers' willingness to start a new project.”

The most negative outlook came out of the Bay Area markets, which had negative sentiment in the office and multifamily sectors, but strong and improving sentiment in the industrial and retail sectors. In the Southern California markets, sentiment was positive nearly across asset classes, with some borderline results in retail; however, sentiment had also declined in nearly every asset class in the four Southern California markets reviewed. “Although Los Angeles, Orange County and San Diego are softening, they are really beginning to approach equilibrium,” adds Tipton. “That is more of a continuation of a trend that has been going on for the last four surveys.”

The survey was conducted after the presidential election; however, Tipton doesn't think that the election played a role in the muted outlook or in developer and investor strategy. “I don't think at this point that the presidential election has any effect on investor sentiment,” he says. “We really hit rock bottom in 2009 and the recovery barely started in 2010, and so we are seven or eight years into recovery, and that is much longer than your typical recovery period. As opposed to a typical V recovery where things come roaring back, this recovery has been anemic. We have never gotten over 2% growth, and in a typical recovery, you are getting 4% growth. It has been a long run in recovery, and naturally, you would think it is petering out.”

While outlook may be starting to soften, Tipton says that we are still in a very healthy market with lots of opportunities, reminding that this specific survey asks professionals to look ahead to 2019, not 2017. “It is not an on-and-off switch, and I think you can generally see that when things aren't frothy anymore and you get to a fully priced market, the answer isn't 'I'm not going to do any real estate transactions anymore,'” Tipton explains. “It is that people get more selective, and people get more focused on location and the land because there is less fluff in the numbers from rent growth.”