Current California Commercial Real Estate Projection

Thanks to an aggressive vaccination campaign across the United States, the coronavirus pandemic is expected to stabilize during the summer, and this will automatically kick off a major uptick in terms of economic recovery. The construction industry of California is already experiencing positive effects in this regard thanks to considerable demand for residential real estate, but the same cannot be said about the commercial sector.

The Outlook for Office Construction Projects

According to the Anderson School of Management at the University of California Los Angeles, the current outlook for new retail and office construction projects in the Golden State is pretty uncertain, and it is expected to stay that way from now until 2023. This does not mean that we should expect a contraction, but the growth will pale in comparison to industrial and multifamily projects, which are widely expected to enjoy a major boost over the next couple of years.

In Southern California, less than 20% of major office developers plan to start new projects this year. Many of these developers handle retail projects as well, and they share a similar sentiment. Industrial projects are expected to be in high demand; this is closely related to the ambitious infrastructure proposals introduced by the White House this year.

The decreased demand in new office projects can be explained by the shift in workplace dynamics caused by the COVID-19 pandemic. Remote work and telecommuting practices have been welcomed by many office managers and business owners, and they are expected to continue beyond 2021 even if we enter a period of outsized prosperity, which is always a possibility. As for the downturn in new retail projects, we can also reference the pandemic because it sparked a major shift towards e-commerce and home delivery of goods and services.

Remodeling and Other Retrofit Projects

Now that we have discussed the outlook for new commercial construction projects, we should mention the climate for conversion, retrofit, and remodel projects. Office spaces are being switched from open floor plans back to cubicles and sections that facilitate social distancing and provide splash guards. Ventilation systems are being improved to promote fresh air circulation and purification. Hygiene stations are being installed in places other than restrooms.

Retail spaces are also being modified in order to reduce contact between shoppers and staff members. Hygiene and disinfecting stations are being set up near store entrances. All these measures are intended to do more than just mitigate the current pandemic; they are good to have in case of future outbreaks. If you have questions about converting your commercial spaces so that they are suitable for post-pandemic California, feel free to contact our office.