Allen Matkins/UCLA Anderson Forecast – Winter 2013 Survey Reveals Dip in Developer Sentiment

Allen Matkins/UCLA Anderson Forecast – Winter 2013 Survey Reveals Dip in Developer Sentiment


– [Narrator] The steady
pattern of growing optimism, gaged in the Allen
Matkins/UCLA Anderson Forecast commercial real estate survey is starting to wane. Twice a year, the forecast
takes the temperature of developer sentiment
for office, industrial, and multifamily in all
major California markets three years out. In the winter 2013 edition, the back step is in office markets, with a similar story
up and down the coast. – In the aggregate,
continuing optimism about improvement in office
markets three years hence. But we also find that the
optimism has waned a bit with respect to vacancy rates. The reason for that is that there are new projects under way, and so there is the
expectation of absorption not completely taking
up all of the new space. That increases vacancy rates, but it does provide product
for 2015 and 2016 as the demand for office space grows. – [Narrator] According to the survey, there is no break in the
momentum for industrial markets in northern and southern California. – The view on the part of our panels for each of these markets was that, as the US economy improves, it’s going to be driven
by industrial space generating demand, increased imports, increased distribution, and
increased manufacturing. – [Narrator] Major US export destinations like China and Europe are
also starting to rebound from a sluggish world economy. – We’re expecting an increased demand for California products from Asia. That increases the demand for industrial space and office space. – [Narrator] The best news
comes from multifamily. – One of the real bright spots in commercial real estate in California, all throughout coastal California, the areas that we survey,
is multifamily markets. So, we have a new generation that is coming into the workforce. They’re demanding multifamily housing. We’re seeing rental rates go up, vacancy rates go down. And our survey shows that, in spite of the new projects that are under way, and there are many of
them throughout the state, our panels are very optimistic about what those markets are going
to look like three years hence. – [Narrator] The survey
shows almost no doubt in multifamily and industrial making good on their promise, and it’s possible the uncertainty forecasted for office markets could just be bad timing. – The survey was taken
in November of 2012, when there was still a lot of concern about the fiscal cliff. – [Narrator] But action on the ground tells a different story. The aggressive activity
now and in the pipeline for office throughout California makes the case for a blip
by nervous panelists, or maybe panelists are
playing one hand on the survey with an ace up their sleeves. – You’re gonna have a very, a big time 2013, with a lot
of investment sales activity. – There are just simply, now, as opposed to just a trading of assets, there have been more people who are seeing that market
conditions justify actually usually demoing an older product, and actually putting
a spade in the ground, which is a fairly significant commitment, both in capital and also to the strength of the development cycle. – If the Blackstone EOP
Portfolio comes out, it will be, magnitude-wise,
a larger amount of properties changing hands
and billions of dollars in California than last
year, no doubt about it. I can’t remember what their
square footage number is, but it’s like they own
50 million square feet of office product. – One of the transactions
that we were involved with in this office in the fourth quarter was the sale of Wilshire Courtyard, and the Miracle Mile area of Los Angeles. And that was actually the largest commercial office building sale in the city of Los Angeles since 2006. That’s an approximately
million square foot project. – We see slightly less
optimism than we saw in June, but it’s not worrisome less optimism. It’s rather a reflection of the markets moving along and moving forward, and we’re still very bullish on California commercial real estate as we look forward to 2015,
based on the survey results.