The harder hit San Francisco and Silicon Valley office markets will likely be the first in California to recover, but Los Angeles may not be far behind, according to the latest Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey.
The forecast, released Wednesday, includes an index of recent leasing and building statistics, plus a survey of California real estate professionals in the office space and investment markets in Los Angeles, Orange County, San Diego, and the San Francisco Bay Area. The report did not detail how many people were surveyed, but noted that Los Angeles and San Diego respondents were far more optimistic than when last polled six months ago.
“Southern California office space markets have not recovered and fundamentals do not by themselves support today’s property prices, but they are getting better,” the report said. “However vacancy rates remain quite high through the region and improvement in some markets is at the expense of others. … What we are observing today in Southern California office markets is the churn that exists before the overall market begins to turn.”
In Los Angeles and San Diego, the report noted high vacancy rates were due more to the economic downturn than to overbuilding. In comparison, the Silicon Valley office space was overbuilt and high vacancy rates are due to both supply and demand conditions. New leases by tech companies appear to be driving the recovery there.
The office vacancy rate in Los Angeles County was 16.9 percent in the first quarter, down a fraction from the 17 percent of the previous quarter, the Business Journal reported in its April 18 issue.
“While the overall sluggishness of the general economic recovery will engender a slow recovery in commercial real estate as well, the prospects are improving,” Jerry Nickelsburg, UCLA Anderson Forecast senior economist, said in a statement. “Optimism with respect to office and industrial market fundamentals in 2013 and 2014, which first appeared a year ago, is an important precursor to the re-start of commercial construction.”
The Matkins/UCLA Forecast was initiated by the Allen Matkins law firm in 2006, to improve the quality and frequency of available market information and forecasts of commercial real estate.
• CLICK HERE to read the Allen Matkins UCLA Anderson Forecast California Commercial Real Estate Survey.
