Coleman Report – California Commercial Real Estate Markets Struggling Amidst Migration
June 8, 2023
Delaney Sexton
Contributing Editor
Coleman Report – California Commercial Real Estate Markets Struggling Amidst Migration
During the Navigating Uncharted Waters: CRE Lending in the Midst of Market Disruption webinar, the speakers were asked:
It was mentioned LA and San Francisco were the two worst CRE markets in the country. Are there any markets in California that are attractive? I understand it’s case by case, but what cities in the U.S. are overall positive?
Jon Winick:
I guess I’d answer the question broader. What cities in the US are doing well that you see in your portfolios?
A panelist responded: “Right now, I think Texas is still doing really well. You know, you got to worry about some overbuilding there, but it’s a very pro-business state environment. The migration that is moving out of California in other states to Texas is significant. We’ve done a number of multifamily projects around Austin and around Dallas. We’re seeing tremendous industrial development opportunities there. Houston’s always its own anomaly, but most of the Texas markets have been strong. I think recently the highest rent growth in the country in the first quarter was actually in Indianapolis, Indiana if I saw correctly. Typically, you see the Midwest and you see a lot of stagnant growth, a lot of out-migration, so I was surprised to see a number of Midwestern markets in that multifamily rent growth study that was done.”
Another replied: “Tim, you referenced it, but I was shocked at how poorly California is doing right now. There are some legal issues I face there and some underwriting issues, so I don’t do a lot in California. We do have assets there, but California is really taking it on the chin right now. Anecdotally in Tampa, I’ve met 7 folks that have moved from San Diego. I mean, I didn’t think anybody ever left San Diego. But with taxes and with fires, even though we’ve got our hurricanes, maybe they’re better than fires. As someone said, just pick your poison with some of the issues going on in the environment, but I was surprised California is getting knocked up so bad right now.”