Investors optimistic about California's commercial real estate market, finds UCLA Anderson Forecast; consensus is that 2012 will present new investment opportunities
February 5, 2010
– Pessimism concerning the California commercial real estate market has turned into optimism according to the latest Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey. The survey has expanded into all of the major industrial and office markets in California and polls a panel of investors in commercial real estate as to their views of how the market will be changing over the coming three years.
“As the recovery from this deep recession takes hold, investors in commercial real estate are increasingly of the view that 2012 is going to represent an improvement over today and will present new investment opportunities,” said Jerry Nickelsburg, senior economist, UCLA Anderson Forecast, and author of the survey results report. “After eighteen months of pessimism about office and industrial markets we are now seeing indications that commercial real estate will turn in the early years of the recovery,” he said.
For Los Angeles, rents are down about 8% from the average 2007 rate. After adjusting for inflation, rents have retreated to the levels experienced in 2004 and 2005. With occupancy at 85% and falling, rental rates should remain weak in the current year. But, as the Los Angeles economy rebounds it will be lead by professional and business services, health care, and education all heavy users of office space resulting in increased demand, increased occupancy and rising rents.
The panel is also optimistic about 2012 in San Diego, but unlike Los Angeles, their optimism may be based upon no new projects being scheduled for completion between now and then. The panel’s view is that rental rates will be at approximately today’s levels but that vacancy rates will fall with the improved market conditions.
The panel expects Orange County markets to equilibrate and market conditions to improve, but not to the extent of Los Angeles or San Diego. Opportunities are going to exist in this very tough market, but not in the creation of new floor space for lease.
For the Bay Area, the average occupancy rate in each of the three Bay Area sub-markets dropped below 80% and new projects are being delayed or cancelled.
The panel is predicting that 2012 will be substantially better than December 2009. Their view is that both rental rates will increase and vacancy rates will fall. The Bay Area, along with Los Angeles, will lead the state out of the recession and office demand will drive down the current high vacancy rates.
For a copy of the latest Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index Research Project, please visit www.uclaandersonforecast.com.
The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index Research Project polled a panel of California real estate professionals in the office space and investment market, and asked a series of questions on various aspects of the commercial real estate market. It was initiated by Allen Matkins in 2006, furtherance of their interest in improving the quality of current information and forecasts of Commercial real estate.
About Allen Matkins
Allen Matkins Leck Gamble Mallory & Natsis LLP, founded in 1977, is a California-based law firm with approximately 230 attorneys practicing out of seven offices in Los Angeles, Orange County, San Francisco, San Diego, Century City, Del Mar Heights and Walnut Creek. The firm's broad areas of practice include real estate, land use, construction, real estate finance, business litigation, corporate and securities, intellectual property, environmental, taxation, bankruptcy and creditors' rights, and employment and labor law. For more than 30 years, Allen Matkins has helped clients turn opportunity and challenge into success by providing practical advice, innovative solutions and valuable business opportunities.
About UCLA Anderson Forecast
UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state's rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://uclaforecast.com.
About UCLA Anderson School of Management
UCLA Anderson School of Management, established in 1935, is regarded among the very best business schools in the world. UCLA Anderson faculty are ranked #1 in "intellectual capital" by BusinessWeek and are renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides management education to more than 1,600 students enrolled in MBA, Executive MBA, Fully-Employed MBA and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.
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