Commercial Real Estate Boom in California

How long will the Commercial real estate boom last in California? For a second year in a row, California’s commercial real estate industry is growing. With employment rates improving and a lack of supply, developers’ optimism is up. The Allen Matkins/UCLA Anderson Forecast sees this optimism continuing for the foreseeable future. The Allen Matkins UCLA Anderson Forecast Survey polls California real estate professionals in the development and investment markets on various aspects of the commercial real estate market, such as vacancy rates, rental rates and future building projects. Between now and 2018, the panelists said the office market would continue to tighten. All of the panels echoed the sentiment that California housing is seriously under-built and household formation is happening faster than new building. With 2% job growth forecasted for the next two years, developers are going to build even faster to keep up.

Silicon Valley, San Diego and San Francisco are all expected to tighten over the next three years. Orange County will grow as well, but not at the same pace. Los Angeles is expected to have an increase in vacancy rates over the next three years. As consumer confidence and spending increased in the second half of 2015, imports from Asia and Mexico continue to flow through California ports. Retailers build up their online presences. The need for storage and distribution space has skyrocketed. About 75% of both the SoCal and Bay Area panelists plan to begin manufacturing and warehousing projects in the next 12 months. Nearly two-thirds of the panelists were planning new retail construction in 2016. Developers and builders across all markets are optimistic about new supply and opportunities across all asset types in the next three years. Supported by job, income and demand growth and a lack of sufficient supply, the commercial real estate market is expected to pass previous peak construction levels.