Things will bottom out in the California office and industrial real estate markets later this year or early next year, but a panel of developers believes there is a "distant glow of light at the end of the tunnel," according to the latest Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey and Index Research Project.
The survey compares the panel's forecast of the market three years hence with today's market.
"After eighteen months of pessimism about office and industrial markets we are now seeing indications that, after the markets hit bottom later in this year or early next year, they will follow the pattern of increased non-residential construction coming two to three years after the end of the recession rather than the pattern of a multi-year stasis in this sector," said Jerry Nickelsburg, senior economist, UCLA Anderson Forecast, and author of the survey results report.
In Southern California, the report notes, the San Diego and Los Angeles county markets are much closer to recovery than the Orange County market.
"In Orange County the implosion in the home mortgage finance industry in 2006 continues to shadow a recovery as other sectors not only have to grow back to their pre-recession levels in order to demand the same amount of floor space as in 2007, but they will have to provide the demand to absorb the excess floor space left by the now defunct subprime lending industry," the report said.
Still, the study predicts that all markets will have higher rents and occupancy three years from now, although in Orange County market conditions will not be conducive to speculative building in the next three years.
As for the Bay Area, the developers in the survey panel view both San Francisco and the East Bay as potentially productive markets in 2013.
As for Silicon Valley, a glut of new space came on line just before the recession started. Thus, the report notes, there is "significant excess supply," but unlike Orange County, the market services some of "the higher growth sectors of the nascent recovery."
