California developers report mixed expectations for the state’s post-pandemic commercial real estate market until 2023. While industrial and multifamily housing markets are likely to grow in the next two years, retail and office markets are likely to contract.

These findings were assembled by the Allen Matkins/University of California-Los Angeles Anderson management school survey, which examines outlooks in office, industrial, retail and multifamily markets in major metropolitan areas.

To be sure, sentiment for the industrial market remains optimistic for the next three years, with respondents reporting current building plans that are marginally higher than pre-pandemic plans. In all California markets surveyed, respondents expect lease rate increases to exceed the rate of inflation and vacancy rates to shrink further by 2023. Therefore, the expectation is for a new wave of warehouse construction in the coming three years, said the survey.

The outlook for multifamily markets is improving in the East Bay and Sacramento, both considered bedroom communities for less-affluent commuters who work in coastal cities. Sacramento is always a key multifamily market thanks to significant government employment. Optimism for the Silicon Valley, Orange County and San Diego multifamily housing markets also increased. However, respondents in San Francisco and Los Angeles were pessimistic because of dramatic declines in rental rates.