by Jodi Summers
It’s another season, time for another UCLA Anderson Forecast…but this one held some surprises in several locations of the traditionally stalwart multifamily sector. For the first respondents in San Francisco and Silicon Valley were strongly negative about the future of multifamily, with moderate negativity cropping up in East Bay and San Diego. Los Angeles and Orange County remained positive, but less so than in previous years.
Something to think about: The generation of millennial renters hit the top of the bell curve in 2016. There is construction everywhere around Los Angeles – a sure sign that developers have swooped in and most likely built higher-end multifamily where smaller buildings used to be. Ubiquitous traffic and high rents indicate that the L.A. apartment market may be approaching saturation.
“While the outlook for 2017 may look relatively good…higher interest rates…and the dropping of fertility rates [are] driving factors in commercial real estate,” confirmed UCLA Anderson School of Management adjunct professor of economics and senior economist Jerry Nickelsburg.
The Allen Matkins/ UCLA Anderson Forecast explained San Francisco and Silicon Valley panelists don’t mean the market is crashing, only that the demand for higher-end multifamily has caught up with supply. Rents will need to adjust for inflation and recent reports suggest rents are already starting to fall in the Bay Area.
This Anderson School surveyed respondents in San Francisco, Silicon Valley, East Bay, Los Angeles, Orange County and San Diego about markets and building conditions three years out. The three-year outlook allows for entitlements, environmental reviews and sales/purchases. Each of these regions has unique natural features that will continue to play into market.
There are fine commercial real estate investments out there. For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – firstname.lastname@example.org or 310.392.1211, and let us move forward together.