Commercial real estate development surge expected in California

As the economy improves, commercial real estate industry leaders are increasingly optimistic about a surge in the California market over the next three years or so, a new report said.

Experts said they expect the nonresidential market will keep growing steadily for the next three years but start to slow after 2016 or 2017. There will still be growth, the report said, but at a slower rate.

The conclusions are based on a survey of selected California real estate professionals in the development and investment sectors of the industry.

Released this week and known as the California Commercial Real Estate Survey, the report is published twice a year by Allen Matkins, a local law firm, and UCLA Anderson Forecast.

The report is broken down by California office markets, industrial markets and multifamily housing markets. Industry experts remain hopeful about each of the markets.

“Since the end of the recession we have seen developer optimism spread to all of the markets and types of commercial space we survey,” the report says. “Today there is the nascent recovery in new nonresidential building predicted by the survey as early as 2010.”

Perhaps the strongest growth will come in the nonresidential market, especially near San Francisco, the report indicated. Half of the developers surveyed in the Bay Area said they planned to start building a new project within the next year. About 33% of the developers in Southern California said the same thing.

Residents throughout the state can expect to see more apartment complexes and mixed-use developments start to pop up. Multifamily real estate is expected to be fairly robust for the next three years around Los Angeles, Silicon Valley and San Francisco, the report said.

“The survey indicates that the market outlook is sufficiently bright for 55% of our panel or their associates to begin new multi-family projects in the coming 12 months,” the report says.

Many of the new apartment and mixed-use developments will be located near transportation hubs, the report said.

Optimism is not quite as high in the industrial sector, which includes manufacturing and warehouse properties, but the report said conditions were expected to improve through 2016, just not as drastically as in the housing and office sectors.

“The issue facing developers of industrial space is the slow growth of foreign demand for U.S. goods and the frugal U.S. consumer demanding higher quality, and not increased quantity of foreign manufactured goods,” the report says. “Both of these translate into slow growth in the demand for industrial space on average over the coming years.”

[email protected]

Twitter: @CaleOttens