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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.


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.

LA residents spent $40 billion on rent in 2018, says report

It’s no secret that Los Angeles rental prices are some of the highest in the nation, but a new analysis from HotPads, a rental database owned by Zillow, illustrates just how much tenants collectively spend on housing each year.

According to the report, renters in the LA metropolitan area, which includes Los Angeles and Orange counties, paid $40.4 billion in rent during 2018. By comparison, that’s more than 423 of the companies on the most recent Fortune 500 list earned in yearly revenue.

Los Angeles was second only to New York in terms of total rent paid, and Angelenos accounted for an astonishing 12 percent of the $504.4 billion spent on monthly rent in the United States during the past year.

LA tenants coughed up around $1.9 billion more in rent during 2018 than the year before, according to the report. But if recent trends continue, local renters may see costs level off a bit in the year to come.

Within the city of Los Angeles, prices dipped slightly in December, according to a separate report from Apartment List. The median cost of leasing a one-bedroom apartment was $1,360 during the month, down from $1,370 in November.

Two-bedroom prices also dipped slightly during the month. They dropped to $1,750, after sitting at $1,760 since late summer.

Those prices are still up since the same time last year, but only by about 1.5 percent. That’s about half the yearly increase allowed under the city’s Rent Stabilization Ordinance, suggesting that LA’s competitive rental market has cooled off significantly since the beginning of the year.

But those numbers only tell part of the story.

Apartment List bases its calculations on U.S. Census data, giving a decent idea of what Angelenos are paying for rent right now. Meanwhile, real estate analyst CoStar uses active listings to get an estimate of what prices those looking for a new apartment are likely to find when searching online.

According to CoStar, the average price of a one-bedroom in Los Angeles County was $1,703 in December. Two-bedroom apartments commanded prices of $2,166. Each of those figures represents an approximately 3 percent increase over a year earlier, but prices have barely budged in the second half of the year.

Between July and the end of the year, prices for both one- and two-bedroom units rose less than a percentage point.



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