Optimism With Your Morning Coffee!
LOS ANGELES–(EON: Enhanced Online News)–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.
“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”
“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.