Sky West Brokerage, Inc. – Market Update 1Q’12
A number of clients have been asking about various sectors and stability in the commercial marketplace. Here are some findings:
Retail – Signs of life but rents are still down but improving. Restaurants sit down lease rates continue to be slow due to the economy but good locations seem to be stabile and making money. Appraisers are not helping either. Banks are requiring debt restructuring or pay down on loans or extending terms to ride out deficiencies. Retail as a sector is weaker than most other commercial real estate categories due to confidence, lack of financing for small business, vacancy, banks not cleaning up their balance sheets and over supply.
Office – The office market is improving with rents in sub markets seeing the bottom or stabilizing. A number of tenants are actively taking advantage and moving up to higher class spaces for same or lesser rent. Lots of tenants are moving around in the market. Not a lot of new tenants moving into the market.
Investments – the market still have not found it bottom or foot hold. There is not any strong trend happening at present, primarily due to banks holding onto assets until markets strengthen a bit more. Volatility in global financial markets has impacted confidence. Watch and see was the 2011 mantra. Lets hope 2012 improves. Spotty deals are being done and high cap rates and debt deals at 50% of value which means higher equity requirements.
Apartments – Spreads between buyers and sellers seem to be the discussion in Apartment sales. Buyer cap rates for older more stable projects seem to be in the 7% to 8% range which Sellers expectations, after holding on for years during the residential boom seem to be in the 5.5% to 6.5% range. Activity will continue and we may even see some construction in Apartments as fewer buyers are qualifying for home purchases due to a number of factors going on in the marketplace.
Industrial – The industrial market is the most active sector and seems to be the healthiest due to its ability to attract e-commerce companies. In Nevada, Tax advantages are helping as it relates to online sales tax collection and we are seeing stronger absorption in industrial more than any other commercial real estate sector on the West Coast.
If you are looking to buy, sell or Lease commercial Real Estate please give Sky West Real Estate Services a call. We have offices in RENO, Los Angeles & Boise strategically located to assist you with any of your commercial real estate needs.
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