multi-family
industrial
retail
Office
ALLEN MATKINS | UCLA ANDERSON FORECAST
62%
Industrial Space Markets
ALLEN MATKINS | UCLA ANDERSON FORECAST
Although panelists are very optimistic about the next three years, their current building plans are only marginally greater than their already ambitious pre-pandemic plans. In both Northern and Southern California, approximately 30 percent of the panelists stated that the experience of the recession has caused them to consider increasing the amount of development they will undertake. Therefore, the expectation is for a new wave of warehouse building over the coming three years.
ALLEN MATKINS | UCLA ANDERSON FORECAST
With the pandemic shifting the use of traditional office space, there is much uncertainty as to what the future of development in this sector will look like.
Though panelists are confident about the growth in demand for office space
between 2020 and 2023, they are pessimistic about the return on investment
in new space today.
17.9
%
78.2
%
93.8
%
10%
15%
20%
35%
30%
25%
Tap each item
2021
ALLEN MATKINS | UCLA ANDERSON FORECAST
Retail Space Markets
Office Space Markets
of panelists indicated that they will not develop any new properties in the coming 12 months
ALLEN MATKINS | UCLA ANDERSON FORECAST
The Winter 2021 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey shows that the current pandemic-related economic recession is having a mixed effect on California commercial real estate sectors, as this particular downturn is not characterized by a slackening in housing markets or a stock market crash. While office space markets are in a holding pattern and retail markets are on a downward trajectory,
multi-family housing and industrial space instead remain in the growth portion of their business cycles.
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:
Office Developers
Take a
“Wait-and-See” Approach
Current Recession Creates More Challenges
for Retail
Industrial Comes Roaring Back to
Record High Optimism
Multi-Family
Market
Sentiment Continues to
Be Mixed
During the previous economic expansion, retail faced an uphill battle. The current recession tripled down on that struggle. Overall, the level of new retail property construction is expected to significantly decline from 2020 through 2023; and some existing space, lacking sufficient demand, will be converted to other uses.
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Dec '19
June '20
Though the pandemic has changed the nature of the demand for apartments — both geographically and in their footprint — multi-family development is still expected to grow in California as the economy rebounds and housing demand grows again.
Multi-Family Housing Markets
reported that the pandemic had either not changed their plans for future activity or increased it
83
%
– 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.
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Industrial Space Demand/Supply
Growth in Southern California
(Three-year Horizon)
X
– Jason C. Parr
Executive Director, Cushman & Wakefield
"One commonality across all multi-family product types is that developers understand the extreme housing difficulties, both in supply and affordability, throughout the Bay Area and believe in the resiliency of the economy."
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X
– Jonathan L. Lorenzen
Partner, Allen Matkins
"Retail developers will need to implement strategies to draw shoppers out of their homes and away from their phones, by focusing on the physical retail experiences that cannot be replicated in a virtual environment."
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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.
– Crystal Lofing, Partner
Allen Matkins
“Notwithstanding the current ‘wait-and-see’ approach that many office developers continue to take, superbly located, first-class office projects, whose target tenant base consists of companies that are in industries poised for growth post-COVID, have proceeded with entitlement and construction.”
X
– Dana P. Palmer
Partner, Allen Matkins
"In concert with the closure and reduction in number of retail outlets, this trend in increased online consumer spending will continue to stoke industrial development and support higher rents."
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X
– Christopher T. Roeder
International Director, JLL
"While secondary and tertiary office markets did not perform as well in the previous decade, these markets may perform better due to larger demographic (i.e. aging millennials) and socio-economic factors driving talent to the suburbs."
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2020
2013
2014
2015
2016
2010
Los Angeles
San Francisco
Orange County
East Bay
San Diego
Silicon Valley
California Office Markets
Indexes of Survey: Three-year forecast
(>50 optimistic sentiment)
100
90
80
70
60
50
40
30
20
10
0
Click on the markets to find out more
Los
Angeles
San Francisco
Orange County
East Bay
San Diego
Silicon Valley
Rental Rates
VACANCY Rates
BACK TO TOP
05%
– El Warner, Executive Vice President Colliers International
“From an investment sales perspective, retail is not overpriced like many other asset classes and as owners and investors get off the sidelines, we’re expecting continued growth and success in the retail space.”
– Barbara Perrier, Vice Chairman
CBRE
“The industrial market continues to be the hottest segment of the CRE world. 2020 was a record year with 224 million square feet of industrial product absorbed in the U.S.”
Dec '20
“Other than industrial, multi-family is currently the most attractive asset class. At the current interest rates and cap rates, the multi-family product is still a good investment.”
– David Blackwell, Partner
Allen Matkins
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