Commercial Construction in the Golden State is Looking Pretty Golden

Roller coaster

If the estimated $2.1 trillion erased from the U.S. stock market over the past week has you white knuckled, you might consider commercial construction in the Golden State, where things are looking . . .  well . . . pretty golden.

According to the Summer/Fall 2015 Commercial Real Estate Survey jointly published by Allen Matkins and the UCLA Anderson School of Management, commercial construction in California has risen to its highest level since 2001.

The survey, conducted of commercial real estate developers and financiers and their outlook for seven metropolitan regions in California including the East Bay, the Inland Empire, Los Angeles, Orange County, San Diego, San Francisco and Silicon Valley, found that all respondents expressed optimism (characterized as an optimism sentiment above 50) that office, multifamily, industrial and retail construction would grow over the next three-years although it varied depending on the region and sentiment was at times lower than when the survey was last taken last year.

Commercial Markets Devloper SentimentAvailable financing, low cap rates, increasing demand from technology, advertising, media and information companies and a shortage of multifamily housing were cited as primary engines of growth. A few of the highlights:

  • Commercial Office Space: While none of the respondents foresee rental or occupancy weakness through 2018, Southern California respondents were more optimistic than respondents in the Bay Area, who believe that current new construction is sufficient to  meet future demand and that rental and vacancy rates should remain relatively flat.
  • Multifamily Residential: Though overall residential construction has remained at depressed levels, multifamily construction has rebounded strongly, in part due to a shift in tastes from single-family to a balance between single-family and multi-family housing, and respondents expect that multifamily construction will achieve a 25-year high over the next three years.
  • Industrial Space: Respondents expressed the most optimism for industrial construction in the Inland Empire and the Southern California regions of Los Angeles, Orange County and San Diego. Reasons given were increased imports through the San Pedro Bay Ports, increased consumer spending, and a continuing shift to e-commerce distribution centers.
  • Retail Space: Respondents were very optimistic with regard to retail construction in Los Angeles, Orange County and San Diego fueled by demand from the technology, advertising and information industries in these regions.

And here’s for those of you on the roller coaster ride called the Stock Market this past week:

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