January 31, 2018
Favorable changes to the commercial real estate market are anticipated as a result of the recent federal tax overhaul, according to respondents in the Winter/Spring 2018 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey. The tax bill is expected to increase the rate of return on CRE, and makes investment more attractive. Survey participants predict it will cause moderate, though uneven growth.
The most recent survey showed increased office developer sentiment for each of the Northern California office markets, and marked the first time since June 2015 that all three markets – San Francisco, East Bay and Silicon Valley – have effectively been at least at the dividing line between optimism and pessimism. Similarly, the sentiment for San Diego and Orange County markets has also rebounded from the June 2017 survey.
Though the tax overhaul was supposed to spur higher returns of investment throughout commercial real estate sectors, that does not seem to be the case in retail development. In fact, the panelists in each of the six California regions surveyed are more pessimistic now than they were before the tax bill passed.
The latest panelist sentiment concludes that there will not be enough industrial space in three years, and that today’s high occupancy rates will hold or continue to rise. In turn, rental rates will increase in step with the lack of available space.
There has been no significant change in multifamily developer expectations since the previous survey last June. But unlike retail, multifamily is performing well for investors.
For comments, questions or concerns, please contact Dennis Kaiser