By RYAN PETERSON
We are three months into 2009 and the current local and national recession has certainly made its impression on the West County industrial real estate market.
Similar to the national economy, our biggest local issue is continued job losses and ever-rising unemployment rates.
From February 2008 to February 2009, the countywide unemployment rate rose to about 7.8%.
As local businesses shed employees in their efforts to increase efficiency and remain competitive, the amount of available industrial space continues to rise.
West County currently has 4.2 million square feet of available industrial space compared to 3.3 million square feet in February 2008, which represents a year-to-date increase of 22%. The available inventory accelerated in August and hasn’t lost much steam.
When looking at available industrial space in West County, the largest jump is in buildings smaller than 20,000 square feet. Within this size range we’ve seen a nearly 45% increase in a year.
This statistic suggests that the hardest hit group is the small to midsize entrepreneurial-type company.
Activity in all segments (user sales, leasing and investment activity) are off substantially. As demand levels continue to bump along the bottom and more buildings come on the market, landlords with empty space are forced to lower asking lease rates and sale prices to help capture the attention of business owners sitting on the sidelines.
The average asking lease rate of 65 cents per square foot per month is not far off the 12 month average, but the primary difference is the spread between the asking price and where leases and sales are actually being completed. In some cases, the spread can be 20% to 30% from ask to deal.
Until some order is restored in the financial sector, unemployment rates flatten and, most important, business owners regain confidence, the local market will continue to suffer.
2009 will be a struggle for most, but it also presents opportunities for thriving companies able to take advantage of vulnerable landlords, compressed lease rates and recent low interest rates.
Peterson is a senior associate in the Newport Beach office of CB Richard Ellis Group Inc.
The Real Estate Watch Chart – Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
CLICK HERE
to download
REAL ESTATE WATCH CHARTS
Please note: to successfully download the file, you will need Adobe Acrobat Reader installed on your computer. For a free copy of the latest software,
click here.
