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Tuesday, September 7, 2010 |
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| Office and industrial real estate business still not healthy |
By Joe Pangburn |
INSIDE TUCSON BUSINESS |
October 23, 2009
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Vacancy rates got slightly smaller for office space while industrial space vacancies grew slightly this quarter, according to Picor Commercial Real Estate Services, which reported both markets are at about 11 percent vacancies.
At the end of the second quarter the vacancy rate in office space was 12.2 percent and in industrial space it was 10 percent.
In industrial space, volume is still far below average or “healthy standards,” according to Picor. The most active industry sectors in the lease market include logistics, health care and education. Those still hurting the most are construction-related firms and small businesses.
• Lease rates have continued to tick down in consecutive quarters, driven downward by decreased demand.
• Vacancy rates had been increasing steadily, and while up in the third quarter, absorption seems to have slowed the velocity considerably. Vacancies climbed the most this quarter in smaller bay spaces, due in large part to the toll the economy has taken on small businesses.
• As for sales, activity for both user and investor sales has been anemic, and land sales have been virtually non-existent.
As for office space, Picor says anecdotal information suggests market activity increased during the third quarter, but the statistics show otherwise.
• Despite what the banking community says, local owner user office building sales have ground to a halt due to more stringent underwriting and appraisal standards.
• Investment activity is nil in a market that was already thin and, again, financing is the major deterrent. Buyers and sellers are agreeing on seller financings for short-term loans get through the drought in the conventional credit market.
• There is little new construction activity for office space in the market. Several small projects will deliver space in the fourth quarter, but no new projects are planned in a market that demands advance sales or pre-leasing.
“We believe that time is still 12-18 months out, but unlike larger markets, Tucson does not suffer from a large overhang of empty, recently completed projects,” according to Picor.
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