California Office Outlook Improves in Allen Matkins/UCLA Anderson Forecast Survey

Commercial real estate developers are starting to see a glass half full. The Allen Matkins/UCLA Anderson Forecast California CRE Survey, which asks a developers to forecast the market in three years, reports improved optimism across asset classes. While industrial and multifamily continue to lead developer sentiment, the outlook for office and retail improved compared to the previous survey. The report includes San Francisco, East Bay, Silicon Valley, Sacramento, Los Angeles, Orange County, San Diego and the Inland Empire.

Office optimism was the highlight of the report. Developers had a positive outlook on nearly every California market included in the survey With only Sacramento falling into the pessimistic range—meaning fewer than half of the participating developers were optimistic about the market in three years—and the Inland Empire sentiment fell at the breakeven point, with half of developers offering a positive outlook and half offering a negative outlook. It is a sharp contrast to the previous survey when developer outlook was pessimistic in every market.

Retail sentiment also improved, although not to the same extent as the office sector. Developers were most optimistic about Northern California with positive sentiment in every market except Sacramento. In Southern California, developers had a positive outlook for Orange County and San Diego, while the Inland Empire was at the break-even point. Los Angeles, on the other had, fell short, with only about 45% of developers offering a positive outlook on the market.

Like the previous surveys, developers showed the most optimism for industrial and multifamily assets. Industrial sentiment was positive in all five of the major markets surveyed, Sacramento, East Bay, Los Angeles, Orange County and the Inland Empire. This wasn’t surprising as industrial sentiment has been outstanding for the last two surveys.

Multifamily sentiment was also positive across all markets in the survey, as it was in the previous survey. Interestingly, multifamily sentiment started to wane in 2020 in many markets, but has since rebounded.

With optimism surging in all market sectors, Jerry Nickelsburg, director at UCLA Anderson Forecast, said, ““Pessimism that has been prevalent since 2020 has, for the most part, turned to optimism.”