The recovery from the pandemic recession has been positive for California’s commercial real estate, with industrial space and multi-family housing strong and retail seeing “new demand not experienced in years.”
That was the word Wednesday from the semiannual Allen Matkins/UCLA Anderson Forecast based on surveys of California real estate professionals.
“Unlike other recessions, the most recent was not characterized by downturns in the purchase of goods and slackening housing markets,” according to the forecast. “The opposite in fact occurred, and this has led to a continued growth of multi-family housing development and industrial space construction, while the ongoing pessimism for retail and office construction has reversed.”
The most surprising part of the forecast was the renewed optimism for retail properties despite the growth of ecommerce.
Forecasters cited three factors: a return to the office in city centers, construction of new housing throughout California, and reconfiguration of retail establishments to a more open-air, post-COVID design.
But ecommerce continues to drive demand for industrial space throughout the state, with the survey finding the highest level of optimism since 2015.
“It’s clear that the construction of new industrial space has years to go before it hits its zenith,” according to the forecast.
Commercial real estate professionals were also bullish about the future for office space, noting many companies are redesigning properties to support hybrid working patterns.
San Diego was seen as the best market for office space in the aftermath of the pandemic because of its industry mix.
“The booming tech and life sciences sectors in San Diego have contributed to a rebound in office space demand,” the forecast found.
While prices for single-family homes soared during the pandemic, the forecast found that multi-family housing is growing again because younger workers are expected to return to urban cores.
“Fully 45% of both the Bay Area and Southern California developers on our panels plan to launch multiple developments in the coming 12 months,” according to the forecast. “Demand is expected to outstrip supply through 2024.”
The Allen Matkins/UCLA Anderson forecast polls a panel of California real estate professionals seeking their expectations over a three-year period. The twice-yearly survey was initiated by Allen Matkins and the UCLA Anderson Forecast in 2006.