Commercial Market News

As we start 2010, we reflect on the challenges and opportunities that exist in our marketplace. Under any type of market condition it is necessary to adapt to the current and impending challenges to find creative solutions. In so doing, buyers and sellers, landlords and tenants can find opportunity. During the past year, and throughout this year, we take great pride in helping our clients do just that.

The economic conditions at the beginning of last year were certainly reflected in the local commercial real estate market. After an abnormally high run-up in prices during the seller’s market from 2003-2006 market balance continued shifting back in 2009. Vacancy rates in most property types were up, while lease rates were down. This brought prices and yields back in line with historical levels of price gains.

During the seller’s market, the biggest driver of value – location - flattened in importance. During this market, location has become a big factor again. While no property was immune from the downturn, properties with the best locations faired far better than those in less desirable locations.

2009 continued to see tenants looking to shave occupancy costs. Rates in vacant spaces around the county offered tenants a chance to get into space at a rate manageable in this economy. And proactive property owners, looking to lock-in tenants to fill negative-cash-flow, empty space, were offering attractive rates. However, we advised owners to stay shorter on lease term, so as not be locked on below market rates when the market swings up again.

Even as the economy is starting to improve, after two quarters of positive GDP growth and stronger corporate earnings, we are still seeing the need to stay competitive on pricing. Until more of the inventory is absorbed, there remains a supply-demand imbalance that will keep a lid on appreciation for much of the year. However, we are starting to see renewed interest among tenants and buyers for well-priced properties as they recognize the opportunities that exist in today’s market.