California Construction Boom Nearing Bubble Burst?

California real estate boom set to burst soon?

California real estate boom set to burst soon?

California’s commercial real estate boom is growing still but the signs of certain bubble burst are already visible, said a new study by UCLA.

The latest edition (PDF) of a biannual survey conducted by the UCLA Anderson Forecast and the California-based law firm Allen Matkins “provides the first indication of a topping out in office and retail markets,” said Jerry Nickelsburg, adjunct professor of economics at the UCLA Anderson School of Management and a senior economist with the UCLA Anderson Forecast.

In the two other markets surveyed, industrial and multi-family housing, the optimism of the past few years continued through the June survey period.

For each of the six markets surveyed — San Francisco, the East Bay, Silicon Valley, Los Angeles, Orange County and San Diego — office developer sentiment has declined since its peak in 2014, as developers have become more pessimistic about the growth of real rental rates and vacancy rates. In Southern California in particular, the survey indicates that markets will remain the same three years from now.

“One can say that the panels are still optimistic, but clearly that is abating,” Nicklesberg said.

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