ALLEN MATKINS | UCLA ANDERSON FORECAST
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2024
Allen Matkins and UCLA Anderson Forecast have partnered to create a Commercial Real Estate Survey and Index to better predict future California commercial rental and vacancy rates. This tool surveys supply-side participants – commercial developers and financiers of commercial development – for insights into their markets. Through an analysis of the Index and the incorporation of the Index into other economic forecasting models, the Survey is designed to provide more accurate information on future office, industrial, retail, and multi-family space in major California geographical markets.
John M. Tipton
Partner, Real Estate
Allen Matkins
Here are the four key takeaways from the report:
Dec '21
Dec '19
June '20
Dec '20
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– Tim Hutter, Partner
Allen Matkins
It is hard to envision a scenario in which COVID-19 and its fallout could remedy the underlying housing affordability issues that California faced coming into 2020. In light of that ongoing concern, we expect demand for multi-family housing to continue to be high.
San Francisco
Orange County
East Bay
San Diego
Silicon Valley
BACK TO TOP
05%
June '21
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Winter 2022
Summer 2021
Winter 2021
ALLEN MATKINS | UCLA ANDERSON FORECAST
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X
JORDAN LANG
“We're seeing folks who have lived in large gateway cities wanting to relocate to other cities, and when they get there, they want a sense of community and they want to see it in their building.”
Los
Angeles
San Francisco
Orange County
East Bay
San Diego
Silicon Valley
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Rental Rates
VACANCY Rates
California Office Markets
Indexes of Survey: Three-year forecast
San Diego
Silicon Valley
East Bay
Orange County
San Francisco
Los Angeles
2008
2022
Summer 2022
Winter 2020
Summer 2020
Dec '22
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What Should California CRE
Markets Anticipate in 2023?
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What Should California CRE
Markets Anticipate in 2023?
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Winter 2023
June '23
2023
Resurgence in Retail Market Creates New Opportunities
New Office Development
Still Awaiting Recovery
Industrial Sector Paints a Mixed Outlook in 2024 and Beyond
2024: A Year
of Flux for Multifamily Development
ALLEN MATKINS | UCLA ANDERSON FORECAST
The Winter 2024 Allen Matkins/UCLA Anderson Commercial Real Estate Forecast (“The Winter 2024 Forecast” or “the Forecast”) reveals that nearly a quarter (21%) of California real estate owners and operators plan to redevelop existing office space over the next three years for alternative purposes across multifamily, industrial and retail. The findings underscore the industry’s growing lack of conviction in the sector as high interest rates, declining valuations and ongoing remote work continue to impact office buildings across the nation.
Office Space Markets
Amid ongoing discussions about the redevelopment of underperforming office buildings, panelists expect that the office sector will not fully recover until the end of 2026 as rental and occupancy rates weaken. As such, new development of office space continues to rapidly decline.
President, McCourt Partners
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(>50 optimistic sentiment)
Matt Field
Co-Chief Executive Officer, TMG Partners
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The Winter 2024 Forecast paints a mixed picture for the industrial sector over the next three years. Development activity remains strong, with 74% of Southern California panelists and 56% of Northern California respondents planning new projects in the next 12 months. At the same time, panelists expect supply to grow faster than demand, signaling that new development will eventually begin to cool.
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ALLEN MATKINS | UCLA ANDERSON FORECAST
Industrial Space Markets
Industrial Space Demand/Supply Growth
in Southern California
(Three-year horizon)
Christopher Rising
Co-Founder & CEO, Rising Realty Partners
“When I think about where the most activity is going to come in California for industrial, it's really hard to get away from the fact that the Inland Empire is just so dominant. If I was going to bet on any market really blowing through this softness and being the strongest I'd bet on the Inland Empire.”
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Despite California continuing to experience a housing shortage, in Northern California, 68% of Forecast panelists report no plans for new multifamily development in the coming 12 months, which can be attributed to high interest rates and rising construction costs.
Sentiment is more optimistic in Southern California, with 55% of respondents planning new development.
For new projects, multifamily developers are leaning into continued remote- and hybrid-work strategies, with developers listing in-home office and co-working spaces, as well as community-oriented spaces, as their top design considerations. Sustainability features are also top of mind for developers working on new multifamily projects.
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ALLEN MATKINS | UCLA ANDERSON FORECAST
Multi-Family Space Markets
Jennifer Jeffers
Senior Counsel, Allen Matkins
In 2024, we expect to see the largest wave of new multifamily supply coming online since the 1980s. However, this trend is not expected to continue, as construction starts are anticipated to rapidly slow down this year. Strategically, for clients with existing real property holdings and access to competitive debt funding capital, it could be an opportune time to advance development due to reduced competition.
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“We've got a number of larger AI tenants which have taken space recently in [San Francisco], which is real green shoots. We've also got a lot of smaller startups in the AI space, taking office space"
Following a period of cautious optimism about the retail market, the Winter 2024 Forecast finds that respondents are now bullish on the opportunity set for retail, with 80% expecting demand to grow faster than supply. This shift in sentiment is largely driven by limited new development of retail space over the last decade paired with growing retailers’ interest in expanding their physical footprint, ultimately increasing competition for space and rent costs.
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ALLEN MATKINS | UCLA ANDERSON FORECAST
Retail Space Markets
Jonathan Lorenzen
PARTNER, ALLEN MATKINS
“Sub-sectors that are attracting investor and developer interest are areas where people want to go. And one exciting area that I've seen in the past year has been growth in historic areas, small downtowns, the so-called old towns of areas where people live as opposed to downtowns.”
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Past Surveys
SUMMer 2023
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Derek ‘Deke’ Hunter, Jr.
President, Hunter Properties
“What we're really focused on, especially in retail, is helping that tenant survive many markets, many changes in the economy. So as we come into a landlord, strengthening environment, what we're really focusing on is our ability to have broader cotenancy rights, our ability to have the right level of security in these shopping centers and pass those costs through.”
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X
Drew Emmel
Partner, Allen Matkins
“As online shopping, and especially same-day and overnight delivery service, continue to expand in popularity, infill development projects will become an even bigger component of the growth of the industrial market. ”
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X
Crystal Lofing
Partner, Allen Matkins
“Interestingly, we're seeing that the location and the quality of the building seems to be more important to tenants than building specific amenities.”
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Dec '24
X
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drew emmel
Partner, Allen Matkins
X
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President, Hunter Properties
Derek ‘Deke’ Hunter, Jr.
X
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JORDAN LANG
President, McCourt Partners
Partner, Allen Matkins