January 29, 2016
The 2016 Winter/Spring Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey signals continued confidence among developers through 2018, indicating both the probability of new supply and opportunities for new investment. The biannual survey projects a three-year outlook for California’s CRE industry, and forecasts potential opportunities and challenges affecting office, multifamily, retail and industrial sectors.
The Survey, taken by California’s commercial real estate industry leaders in December 2015, indicates “continued optimism with only a smattering of caution with respect to the continuation of the current run,” says Jerry Nickelsburg, adjunct professor of economics at UCLA Anderson School of Management and senior economist with the UCLA Anderson Forecast.
A few key findings from survey participants include:
- California CRE is booming once again in all asset classes.
- Growth in retail is one of the surprising trends, despite the rise of e-commerce.
- Retail is moving from being simply a distribution outlet, to being an experience that developers are required to create.
- Retail centers that are well-located and offer a plethora of services are those that wind up doing well.
- Developers are optimistic about the East Bay. What that signals is: higher rents in San Francisco and Silicon Valley are going to start driving more and more demand for office space into the East Bay.
- We are mid to late in the business cycle. There is a recession that will happen at some point in time.
- The American economy’s already been in a historically long recovery. The smarter people know there’s going to be a cycle. They just don’t know when the cycle will end, and the next one starts. They’re land banking, and looking at deals that don’t have to come up right now.
- This recovery will take longer because of how anemic the recovery has been.
- Overall, developers in CRE are very optimistic about the next three years. They see markets tightening or at least staying as tight, and that’s why we’re seeing the boom in CRE building.