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recent commercial real estate survey by UCLA Anderson School of Management and Allen Matkins found that over a third of developers statewide are putting projects on hold or canceling them due to concerns about tariffs and supply chain constraints. The joint initiative surveyed 140 real estate firms across multifamily, office, retail, and industrial sectors, with 85% of respondents reporting increased caution in new developments.
Spencer Kallick, operating partner at Allen Matkins' Century City office, attributes this wariness to uncertainty surrounding tariffs and capital markets. However, he notes that there is still a significant amount of "dry powder" or capital on the sidelines waiting for investment opportunities.
The multifamily market remains active, particularly in Los Angeles where demand continues to outpace supply. A majority of California's regions anticipate office recovery, except for Los Angeles, Sacramento, and the Inland Empire. Kallick highlights that trends are submarket-driven, with Century City being a standout performer.
In Southern California, office development intentions have increased from 9% to 16%, but this is still relatively low. Kallick sees growth opportunities in owner-user buildings and class A plus properties, which have lower vacancy rates than the overall office market. He also notes a shift towards longer-term office leases, typically ranging from 15-25 years.
Similar to the office sector, Los Angeles, Sacramento, and Inland Empire have pessimistic outlooks in retail. However, more SoCal developers are planning new retail projects than NorCal developers. Kallick sees opportunities in experiential retail and new brands that aren't easily accessible through e-commerce.
The industrial sector remains strong, driven by e-commerce demand for warehouse space near customer bases. Despite this, 31% of Southern California respondents expect fewer industrial projects to break ground compared to the prior survey. Kallick attributes this decline to uncertainty in the market and concerns about tariffs affecting construction costs.
