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California commercial real estate stabilizes, developers grow more selective
In the Summer 2026 Allen Matkins/UCLA Anderson Forecast survey, 64% of respondents said the current interest rate environment has made them more cautious about new projects, up from 61% who felt more optimistic during the Winter 2026 survey.
California’s commercial real estate market is stabilizing as developers adjust to a prolonged higher-rate environment, according to the Summer 2026 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey released Wednesday, as summarized by ConnectCRE.
While financing costs, construction expenses, and broader economic uncertainty continue to limit new development, respondents said they remain optimistic about the long-term outlook for needs-based sectors.
The survey points to improving market fundamentals across much of California, but not a broad rebound, with respondents describing an increasingly selective investment environment where projects must meet higher underwriting standards before moving forward.
ConnectCRE also highlighted a shift in expectations around rates: 61% of respondents in the Winter 2026 survey said anticipated rate cuts made them more optimistic about development, but 64% now say the interest rate environment has made them more cautious about pursuing new projects. Allen Matkins partner Spencer B. Kallick said the market is still moving, but project evaluation is fundamentally changing as developers assume higher rates will persist.