The future of commercial real estate has been a hot topic since the start of the COVID-19 pandemic, which saw many brick and mortar stores close their doors (some permanently, some temporarily) and employees ditching the corporate office for the home office. However, a new Allen Matkins/UCLA Anderson Forecast has indicated that office and retail development in California will likely pick up in the near future.

The survey polled a panel of California real estate professionals in the development and investment markets. The results indicate that the current pessimistic cycles for the office and retail sectors have “hit their respective floors” and will pick up due to increasing demand.

The office space market

When it comes to office spaces, the survey found that recent “return-to-office” activity has led to panelists being less pessimistic about what the future holds. In Southern California, 29% of those surveyed said they plan to start a new office project – a 17% jump from the last survey. 

“The bottom line from the survey is that while developers are, on average, still taking a wait-and-see approach, fewer of them are on the sidelines,” the survey states. “This provides…[an] early signal of a turn in the market.” 

“As workers return to the office, the demand for the amenity-rich office should push construction and remodeling activity…” it continues.

The retail market

The survey states that coastal Southern California regions have seen substantial retail employment gains despite pandemic restrictions. It also notes that although retail properties will likely generate lower returns in 2024 compared to the end of 2021, that “does not mean the absence of solid targeted opportunities.” 

“New housing developments, whether they are multi-family or single family, generally require nearby retail. The booming housing market will continue to generate this demand,” the survey says. 

The industrial space market

The clear winner in the survey was the industrial space market, which has seen consistently high occupancy rates and lease rate growth over the past several years.

“In both Northern and Southern California, the developer sentiment indexes indicated the current increase in lease rates would continue to exceed the rate of inflation, and the already low vacancy rates are expected to be even lower by 2024,” the survey states, crediting online shopping for increasing the demand for industrial space.

Almost 66% of the Southern California panelists said they plan to begin multiple new industrial developments in the next 12 months. 

Kronos: A boutique San Diego commercial property management company

Kronos would love the opportunity to manage your San Diego area commercial property, whether you own an office space, a retail space, or an industrial space. We are experts when it comes to commercial real estate property management, offering a boutique service that is personalized due to your own unique needs. Everything we do revolves around making our owners happy, from contract administration to tenant retention, maintenance supervision, and more. 

We would love the opportunity to win your business. Call us today at 619-488-7870 or 858-956-5983 to learn more about us and the services we offer. We look forward to hearing from you!