Allen Matkins Development Survey Nails It

The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index is celebrating its 10-year anniversary. To commemorate the moment, Allen Matkins and UCLA Anderson produced a 10-year retrospective to look at the accuracy of the survey results. The survey, which analyzes developers’ three-year outlook of construction activity across asset classes, was highly accurate, showing a strong correlation between the survey results and actual building activity.

“This 10-year retrospective—as opposed to the semi-annual survey that looks three-years ahead—looks back at how predictive the survey was or wasn’t,” John Tipton, operating partner at Allen Matkins, tells GlobeSt.com. “Jerry Nickelsburg did that by looking at qualitative and quantitative results. He found that, with a few exceptions, the survey results predicted pretty accurately the new level of building activity three years out. He found it to be a good predictor. In the next decade, he has plans to refine the survey to further increase its predictiveness.”

One reason that the survey has been so highly accurate is because the sample group consists of active developers. “These are the people that are going to do the project and pull the permit, but on the other hand, asking what you are going to do three years from now is a tougher question for developers,” Nickelsburg. “That is where I was the most pleased. As time has gone on, this survey has become more wildly known, and some of my own clients look for this survey because it is a piece of data that they use when making their analysis and seeing where other players are. Now that we have this retrospective analysis of its effectiveness is very helpful.”

The survey started in 2007, so the results really analyze the recession through the boom that we have seen this cycle. “We started this in 2007, which some people would say was the prior peak,” explains Tipton. “Now, the market hasn’t trended down again yet. In the last few surveys, we have seen more uncertainty. When you think about it, we have had eight good years of growth, and we have a lot of things going on in the economy.”

The next 10-years of the survey will really show the accuracy of developer sentiment, because we will almost certainly be another downturn. “We have potential trade wars, which could happen; there is the lowest unemployment since the 60s, which by definition, can’t keep getting better; there are more people looking for employees than people who can fill those jobs,” says Tipton. “In the next 10-years, we are going to have another turn or two, and that will really help hone in on just how predictive this survey is and allow us to create modifications that potentially need to be made.”

The next survey comes out next month, and Tipton expects this retrospective to help boost confidence in the results. He says, “This will be something that underpins my clients’ confidence in the predictability and reliability of the semi-annual survey.”