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Commercial Real Estate Projections Look Bright For Orange County

A panel of experts in the SoCal rental market was optimistic about the future of Orange County’s commercial real estate into 2023.

Commercial real estate in Orange County was projected to improve into 2023, experts say.

 

ORANGE COUNTY, CA — A three-year outlook forecast projects a bright future for California’s commercial real estate market will continue to improve.

A panel of experts at the biannual Winter 20202 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey was optimistic that Orange County rental rates would increase faster than inflation while vacancy rates would be lower.

Though economic projections show a slowing in the economy for 2020, developers’ views on most California commercial real estate in 2022 are optimistic. There is an eagerness to get in on the ground floor of the next commercial real estate expansionary cycle, according to a UCLA economic forecast released Wednesday.

The panel projected a look ahead over the next three years of California’s commercial real estate industry, forecasting potential opportunities and challenges that may impact office space, multi-family, retail, and industrial sectors.

Overall, survey panelists for each market, except for retail, predict that 2022 will be as good or better than 2019, according to a statement accompanying the survey.

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Panelists were optimistic about industrial and multi-family projects, while office markets are neutral, and retail space sentiment generally remains pessimistic.

While recent surveys indicated that the peak of the office market had been reached in the current cycle, the latest study suggests a beginning of a return to confidence by 2022.

In the San Francisco, Silicon Valley, and Los Angeles markets, this optimism is confined to rental rates, with only a slight decline in occupancy.

These views are consistent with the perspective of most economists that the California economy will return to faster growth in 2022, and will generate new jobs requiring additional office space.

With the industrial market currently dominated by warehouses serving continued growth in e-commerce, survey panelists don’t see the red-hot industrial market pulling back any time between now and 2022.

Activity throughout Northern California and the Inland Empire is expected to remain at the same level of strength as Wednesday. At the same time, the Los Angeles market was also expected to improve. Both space shortages near ports and a current but temporary downturn in trade are attributed to those projections.

An expansion of the Los Angeles industrial market will ultimately be driven by the implementation of multi-story edifices with productivity enhanced by robotics and new technologies to manage the high-rise warehouses, according to the statement. While the timing of these technologies is still unknown, they are expected to help drive Los Angeles industrial property values when rolled out in the years to come.

While the last survey saw a glimmer of hope for a moderate retail rebound, sentiment in this space has returned to pessimism—panelists have given retail its lowest values since this survey began collecting retail predictions four years ago.

This pessimism is likely fueled by the constant shift to online shopping and the weaker-than-expected start to the 2019 holiday shopping season. A weakness in the demand for the revitalization of existing retail space is also driving this pessimism.

City News Service, Patch Editor Ashley Ludwig contributed to this report.

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Housing Starts Surge

It was a quiet week for mortgage rates. There were no significant new developments with China or Iran, and the reaction to the economic data was small. As a result, rates ended the week nearly unchanged.

A lack of inventory has been holding back home sales in many regions, so Friday’s report on home construction was very encouraging. In December, housing starts rocketed 17% from November, which completely blew away the consensus forecast, and were at the best level since 2006. They were a massive 41% higher than a year ago. The strength was seen across the board in both single-family and multi-family units.

Since consumer spending accounts for about 70% of all economic activity in the US, the monthly retail sales data is a key indicator of growth. The latest report revealed that consumer spending remained solid during the important holiday shopping season. In December, retail sales rose 0.3% from November and were up an impressive 5.8% from one year ago. Once again, the greatest improvement was seen in online sales.

As expected, inflation held steady in December. According to the Consumer Price Index (CPI), a widely followed monthly inflation report that looks at the price change for goods and services, core inflation was 2.3% higher than a year ago. This was the same annual rate of increase as last month.

Looking ahead, it will be a very light week for economic data. Of note, Existing Home Sales will be released on Wednesday. Beyond that, the next European Central Bank meeting will take place on Thursday. In addition, news about Iran or the trade negotiations with China could have an influence.