This month, June 2010, the magazine Western Real Estate Business has a profile on the Sacramento Market. With our colleagues at Cassidy Turley we contributed to the commercial real estate market review. Here are a few of our observations.
SACRAMENTO
Like most markets around the country, the Great Recession has severely impacted the overall state and morale of the Sacramento area in all facets and in some aspects even more so. Some of the effects have been dramatic job loss, wage losses, soft tenant demand, increased vacancy rates, plummeting rental rates, depressed housing values, rising residential and commercial foreclosures and tightened credit practices to a decline in consumer confidence and spending. Unemployment exceeded 13 percent in March 2010 from the mid-5 percent range pre-recession as a substantial number of jobs, more than 80,000 wage and salary jobs, have reportedly been lost in the area since mid-2007. Commercial real estate vacancies have climbed to new highs as rental rates have plummeted. It was reported in early 2010 that for every six businesses open, one was closed in greater Sacramento; this is a very staggering statistic.
New construction projects, namely office-oriented, that were funded a few years ago during the last market recovery were still being completed through 2009, which continued to add further strain to vacancy rates. Many retailers, from small shops to big box, have been forced to close their doors as a result of the difficult economic climate that has resulted in depressed consumer confidence and a drop in retail sales. Some large and small retail tenants have recently begun to emerge or re-emerge in the marketplace, but there still remains a lot of vacancy to fill.
New construction projects, namely office-oriented, that were funded a few years ago during the last market recovery were still being completed through 2009, which continued to add further strain to vacancy rates. Many retailers, from small shops to big box, have been forced to close their doors as a result of the difficult economic climate that has resulted in depressed consumer confidence and a drop in retail sales. Some large and small retail tenants have recently begun to emerge or re-emerge in the marketplace, but there still remains a lot of vacancy to fill.
Additionally, home prices have plummeted from their pre-recession levels, while foreclosures have climbed, with the latest figures showing more than 56,000 foreclosures since the start of 2007 in the Sacramento area. The city’s housing sector has been one of the most negatively impacted statewide although there are signs that it is beginning to right itself. In the commercial sector, a significant amount of foreclosures have been realized and a sizable number more are expected. In recent reports, the Sacramento metro area ranked No. 3 in the nation in terms of bankruptcy filings. However, the problems in the commercial sector are not anticipated to be as significant on the metro economy as the residential market.
— Ken Reiff is a managing partner with Cassidy Turley BT Commercial’s Sacramento office and Jim Gray is a leasing and sales specialist.
Here is a link to the entire article: http://westernrebusiness.com/articles/JUN10/highlight1.html
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