Office developers and investors expect San Francisco rents to decline over the next three years, which may delay new construction as a result, according to a survey by UCLA Anderson Forecast.
The results were more pessimistic than the projections of the group itself, which noted that local occupancy and rental rates have all been increasing in recent years and employment growth is the fastest in the state. The dour view may be tied to the slowing national economy and a hangover effect from the technology crash of 2001, it said.
“They don’t see demand recovering to the point that it’s in balance with supply,” said Jerry Nickelsburg, economist with UCLA Anderson Forecast, which performed the survey in conjunction with law firm Allen Matkins Leck Gamble Mallory & Natsis LLP. “Overall, they see the market kind of where it is today, not a robust market.”
UCLA Anderson’s model, on the other hand, showed the office sector strengthening in 2009 and beyond, which would boost demand for office space and rents, he said. If builders choose to hold off on new construction as a result of an overly negative assessment, San Francisco could face a shortage of office space by 2011, the report said.
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