An Evening of Vision and Partnership: SoCal Development Market Overview

The fourth annual SoCal Development Market Overview brought together a mix of industry veterans, emerging leaders, and forward-thinking professionals. Hosted in collaboration with AO and Arcus Harbor, the event drew a packed crowd despite notorious San Diego traffic. The event featured appreciation for key sponsors, including VCA, Assured Partners, Fuscoe Engineering, Snyder Langston, FQF Advisors, Salas O’Brien, MJS, and Troutman Pepper, and insights into the current real estate development landscape.

The Power of Strategic Alignment

The event opened with reflections on recent strategic moves, highlighting the deep corporate engagement and alignment at Matthews™. From founder Kyle Matthews to President Dave Harrington, the leadership’s personal involvement in transactions underscored a client-first philosophy. Rosie Cooper and Stew Weston introduced themselves as the hosts for the event. Their partnership focuses on land development in Southern California, and they recently joined Matthews™ towards the end of 2024.

Rosie and Stew exemplified how deep expertise translates into results. With her background in civil and environmental engineering, Rosie adds her development and construction knowledge to each project, resulting in over $5 billion of entitlement and development experience. Meanwhile, Stew brings more than 30 years of experience to the table with over $13 billion in sales, and expertise in simple or complicated deals.

Rosie and Stew’s Deal Status

After Rosie and Stew introduced their team, they highlighted the status of their deals. Their current deals are active in the Inland Empire, San Diego County, Orange County, all the way to Napa. Their largest deal on the market is located in Anaheim Hills, with more than 90 acres. Most of their deals feature mixed-use opportunities and are attractive for their proximity to other retailers nearby.

2025 Developer Survey: New Metrics, New Mindsets

The annual developer survey provided data-driven insight into market sentiment:

• Target Returns: A majority of developers underwrite in the 6 to 6.5% range for untrended return on cost, which is a significant change from 2024. Last year, 35% of developers noted their untrended return on cost at 6%, followed by 33% at 6.5%. Additionally, 45% of developers now recorded that their untrended return for the last deal was approved at 6.5%. Last year, the majority of investors also reported their untrended return at 6.5%.
• Southern California Risks: Construction costs now top the list of concerns (59%), overtaking political climate (28%). Political climate recorded a significant decrease, recording 28% risk, while it was at 46% risk in 2024.
• Metro Preferences: San Diego and Orange County recorded the most interest at 26%, followed by the Inland Empire at 20%. The Inland Empire recorded an uptick as it was at 16% interest in 2024. Los Angeles stayed the same with interest at 17%, along with Ventura reporting the same interest of 11%.
• Deal Size: The targets for deal size noted significant differences from last year’s results. The target for “the bigger, the better” noted the largest jump from 7% last year to 17% this year. Preferences remain the strongest for 200-300 units at 30% this year, but this dropped from 36% in 2024. This year resulted in 100-200 units recording 24% interest, 300-400 units at 16% interest, and 50-100 units at 13% interest.
• Hold Periods: Over 50% of respondents now plan to hold assets long term, suggesting a shift toward cash-flow stability and refinancing, rather than quick flips. This is different from last year when 57% of respondents stated merchant build for their hold anticipation.
• Equity: Half of respondents are targeting 20% IRR for their equity.
• Production Goals: More than half of respondents increased their production goals from last year.
• Production Outlook: Optimism is high—75% of developers believe 2026 will see greater project delivery than 2025.

Macroeconomic Realities: Capital Markets in Flux

Stew’s data-packed segment highlighted sharp interest rate fluctuations and the continued impact of economic policy on deal feasibility. While top-tier markets like Orange County represent only 4% of national supply growth, they remain highly desirable. As construction financing remains high, multifamily starts are now down 75% from their peak in 2022.  Meanwhile, multifamily completions are down 50% from their peak, setting the stage for future rent escalation due to constrained supply. By early 2026, quarterly new supply is expected to fall to less than half of current levels.

In Q1, the monthly payment premium for a newly-purchased home was 43% nationally. The monthly mortgage payment for the first quarter was $3,123, compared to $2,184 for the effective rent. This is keeping renters renting for longer and helping preserve existing occupancies.

The monthly payment premium of buying over renting exceeds 100% in many markets. Los Angeles and Orange County record one of the highest premiums. Additionally, vacancy across many of the largest markets has now more than fully recovered to below pre-pandemic trends. In Southern California, the main metros now note a vacancy rate in the 3 to 4% range.

The ongoing gap between rent and mortgage payments is supporting rental demand, particularly in high-barrier markets like Los Angeles and San Diego. Renewals are up, turnover is down, and rents are forecasted to grow modestly (3–3.5%) across Southern California—a return to more sustainable underwriting practices.

Renewals noted an uptick over time, consistently increasing since Q1 2023. Multifamily has become the leader with the greatest total share of investment across the country at 39% as of Q1 2025. Multifamily investment volume for the six gateway markets totaled $43.3 billion and accounted for 28% of total U.S. multifamily investment volume over the last four quarters.

Panel 1: Here and Now: Residential Strategy in Real Time

A cross-section of developers—Greystar, Toll Brothers, National CORE, and Greenlaw—discussed their strategies:

• Affordable Housing Innovations: Faith-based partnerships, school districts, and health systems are becoming crucial partners in affordable projects.
• Regulatory Challenges: California’s “zone zero” fire hazard designations are forcing a return to duplex development in some areas.
• Execution Focus: Developers are emphasizing execution discipline, creative land assemblage, and cautious phasing over speculative builds.
• Capital Stack Caution: Many are turning to joint ventures and creative capital sources to bridge equity gaps in a high-interest environment.

Panel 2: Navigating Capital Markets in Today’s Residential Landscape

Experts from Greystar, Comerica Bank, and Voya Investment Management outlined evolving lender strategies:

• Return of Bank Construction Lending: Banks are back, but with lower leverage (typically 60-65%) and a demand for increased equity.
• Bridge and Agency Loans: Demand is rising for short-term and flexible products as many developers avoid long-term commitments amid rate uncertainty.
• Cautious Optimism: While underwriting remains disciplined, lenders expressed cautious optimism, particularly for suburban, less dense, and “attainable” housing.

Panel 3: Hines’ Investing and Developing Across Continents

Drew Huffman of Hines wrapped up the event by framing the U.S. as a globally attractive investment environment, especially for “living” assets—Hines’ umbrella term for residential, land, and mixed-use projects. With supply dwindling and demographic drivers remaining strong, Hines is positioning to be a first mover once construction economics normalize. The firm is also expanding land development capabilities in the West, exploring markets like Utah and Arizona.

A Clear Mandate: Bold, Disciplined Action Ahead

As the event concluded, attendees left with a clear message: opportunity in Southern California development remains strong—but only for those who are adaptive, analytical, and aligned with the right partners. Whether through smarter design, deeper capital stacks, or creative entitlements, the next cycle belongs to the bold.