The Winter 2026 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey released Thursday shows expectations for new development turning cautiously positive. Fifty-one percent of California commercial real estate executives anticipate an increase in development activity over the next three years, up from 34% last summer, while 61% of respondents report increased optimism for development activity due to anticipated interest rate cuts.

Additionally, concerns around distress appear to be stabilizing statewide. Sixty-eight percent of respondents say distress levels have either remained consistent or have peaked and are beginning to decline, up from 58% in the prior survey.

“After a long period of higher-for-longer interest rates and challenging financing conditions, we’re now entering the next phase of the investment cycle,” said Spencer Kallick, partner at Allen Matkins. “Developers and investors are coming off the sidelines, adjusting to the new normal and beginning to re-engage and deploy capital into compelling assets.”

Conversely, the Winter 2026 Forecast highlights a divergence between Northern and Southern California office markets. In Northern California, 75% of respondents expect office demand to grow faster than supply, up from 61% in summer 2025. Downstate, 68% of survey respondents don’t expect Southern California’s office market to recover within the next three years.