Despite higher interest rates and slower economic growth, confidence on the part of developers indicates a positive outlook for commercial real estate growth through 2018, according to a survey released Tuesday by UCLA economists.
The latest Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey found “continued confidence among developers through 2018, indicating both the probability of new supply and of opportunities for new investment,” said a statement released by the UCLA Anderson School of Management.
The biannual survey projects a three-year outlook for California’s commercial real estate industry and forecasts potential opportunities and challenges affecting office, multi-family, 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,” said Jerry Nickelsburg, adjunct professor of economics at the Anderson School.
“The favorable outlook is supported by job and income growth on the demand side and a lack of sufficient building on the supply side,” he said.
The sentiments of the panelists surveyed signal a continuation of the growth of non-residential construction at or above previous peak levels, according to the Anderson statement.
The majority of office developers had a promising outlook on California’s coastal cities. However, while expectation is high, it is slightly lower than last year.
That expectation decline was attributed to the “general mood of investors that although the U.S. economy continues to grow, slower growth outside the U.S. and somewhat more volatile world financial markets dictate a bit of prudent caution,” the statement said.
Technology companies seeking non-traditional office parks are driving the majority of the demand, it said, adding that “areas favored by these companies are experiencing robust markets.”
Sentiment in the office space market remains highest in Southern California, likely due to the increased rate of job growth in the region and a tightening of office space supply, it said.
One in three of the Southern California panelists — including from Los Angeles, Orange County and San Diego — began a new project during the previous 12 months, up significantly from less than one out of four surveyed in June 2015, the statement said.
Looking ahead, 42 percent of those surveyed in Southern California indicated that they would start one or more projects within the next 12 months, according to the Anderson school.
Panelists were optimistic about the Bay Area, but not as much as Southern California, it said.
The San Francisco and Silicon Valley survey panelists view the current 5 percent growth rate of office-using employment in San Francisco and 7 percent in Silicon Valley as unsustainable, the statement said.
— City News Service
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