S
outhern California’s commercial real estate landscape in 2025 was a whirlwind of change. Fires in Los Angeles, new state‑level housing and development reforms, the looming 2028 Olympics, a slump in Hollywood productions, persistent office vacancies, and ongoing affordability battles all converged to create a mix of headwinds and openings. The region’s outlook for 2026 remains anything but dull.

    Five industry voices were consulted before the holidays to gauge the region’s trajectory: Corinne Verdery (Caruso), Jaime Lee (Jamison), Sandy Sigal (NewMark Merrill), Katie Grissom (Nuveen), and Dan Michaels (Stockdale Capital Partners). Their insights span optimism, realism, and caution, but all agree that 2026 will be a pivotal year.

    **Housing and Mixed‑Use**

    Corinne Verdery highlighted a surge in demand for multifamily and workforce housing. Caruso is adding residential units to its Montecito hotel and focusing on mixed‑use projects that offer safe, attractive environments. “When people trust and enjoy a property, performance follows,” she said.

    Jaime Lee noted a shift from paralysis to action. After a period of repricing and waiting, capital is ready to flow again, especially into Southern California. Small interest‑rate changes and flexible financing could significantly boost confidence.

    Sandy Sigal underscored California’s density, diverse cities, and strong employment base as positives, but warned of high taxes, over‑regulation, crime, and a lack of financial discipline. He remains committed to solving these issues despite the challenges posed by Los Angeles and state policy.

    **Retail Fundamentals**

    Katie Grissom emphasized that Southern California still boasts robust real‑estate fundamentals. Population density, housing shortages, and high development barriers create long‑term demand across asset classes. Grocery‑anchored retail, in particular, has become a defensive income strategy in supply‑constrained markets like Los Angeles, Orange County, and San Diego.

    Dan Michaels pointed out that the legislative climate—fires, wage ordinances, and a generally hostile environment—has made the region less attractive for development. Hospitality and soundstage production have suffered, and transfer taxes have cut profits. He remains nervous about 2026 but sees pockets of opportunity.

    **Regulatory Momentum**

    California passed several state‑level measures to cut red tape, including CEQA reform and transit‑oriented affordable‑housing bills. The City of Los Angeles and Los Angeles County streamlined approvals for projects in fire‑affected areas. Jaime Lee praised the shift in rhetoric toward addressing the housing crisis but cautioned that progress must be measured in units built, not statements made.

    Sandy Sigal welcomed CEQA reform and called for more action to improve safety and adjust tax rates. Katie Grissom noted that streamlined approvals and targeted reforms are most impactful when applied to existing assets rather than new construction, suggesting that repositioning underutilized properties can unlock value without eliminating supply constraints.

    **Opportunity Areas**

    Corinne Verdery identified well‑designed mixed‑use communities as outperforming, driven by demand for curated, safe, and welcoming environments. Jaime Lee saw Southern California as a prime candidate for office‑to‑residential conversions, citing dense office centers and underutilized buildings. He stressed the need for predictable, by‑right adaptive‑reuse policies to unlock this potential.

    Dan Michaels highlighted medical‑office space—especially outpatient facilities—as a high‑density, high‑return asset class that receives less attention.

    Sandy Sigal noted that retail remains underappreciated, with capital flowing into industrial and multifamily at the expense of high‑quality retail assets. He argued that retail fundamentals have improved structurally since the pandemic, with limited new supply and disciplined tenant economics.

    **Strategic Moves**

    Caruso is focused on reopening Palisades Village in August 2026, adding new tenants and enhancing the property to match its original excitement. The firm remains selective, prioritizing long‑term value, community impact, and experiential design over sheer square footage.

    Jamison, a family‑run firm, is expanding beyond Los Angeles, exploring markets that offer supportive policies and capital for affordable housing. They have secured significant Low‑Income Housing Tax Credit allocations and are testing the theory that success in L.A. can translate elsewhere.

    NewMark Merrill, while rooted in California, acknowledges the challenges of a slow regulatory environment and high operating costs. The firm is exploring opportunities in other states but maintains a strong California focus due to its deep local ties.

    Nuveen’s investment in grocery‑anchored retail reflects long‑term conviction. The firm uses AI and data analytics to understand consumer behavior, guiding both investment and asset‑management decisions. In Southern California, data confirms that convenience, proximity, and essential services drive retail success.

    Stockdale Capital’s aggressive acquisitions—such as The Oaks mall in Thousand Oaks and The Quincy at Kierland—illustrate a belief that the market reset will continue. Dan Michaels attributes this to the impact of rising interest rates, which re‑rate valuations and affect lender relationships. He sees a continued need for capital to drive projects in a market saturated with institutional investors.

    **Conclusion**

    Southern California’s commercial real estate scene is marked by complexity and opportunity. Housing demand, mixed‑use development, retail resilience, and adaptive reuse all present pathways for growth. Regulatory reforms offer hope, but tangible progress will hinge on unit delivery, streamlined approvals, and capital availability. The region’s future will be shaped by how well stakeholders navigate these challenges and capitalize on emerging trends.