There was no relief from the economic downturn for Clark County’s commercial real estate market in 2009. This year, the forecast is generally for owners and tenants to “hold on as long as you can.”
The year looks like another one without the “double Ds” of demand and consumer debt to help fuel the job market and, in turn, retail consumption. Those are fundamental for expanding demand for commercial real estate.
o There will be no new multi-tenant commercial or industrial construction because of over-capacity.
o Industrial space rental rates should stabilize at 40 cents to 45 cents per square foot.
o The only retail expansion will be certain food service businesses.
Clark County has a surplus of over 3 million square feet of space available for immediate occupancy in the office, retail and industrial markets. There will be no new multi-tenant commercial or industrial construction in 2010 because of this over-capacity.
Here’s a roundup:
Office market
The Class A office market started the year at 20 percent vacancy and will end the year at 19.5 percent vacancy, with over 1 million square feet of vacant Class “A” office space available.
However, the Class A office market did experience more than 100,000 square feet of net absorption during the year. In 2009, the new Angelo Building at 400 E. Mill Plain captured its first tenants and is nearly 60 percent leased. But a weak market pushed Class
A rental rates to a five-year low in 2009, with tenants obtaining very attractive rental rates, free rent and above-standard tenant improvements from landlords during lease negotiations.
With no new Class A office construction planned for 2010, vacancy rates should trend down to 16 percent by the end of the year, with fewer landlord concessions required to attract tenants.
The continued bright spot for Class A is the former Boise Cascade Columbia River waterfront site, which will be in the planning stages for a new mixed-use urban development, including Class A office space. Construction is scheduled to start in 2011 or 2012.
Industrial market
With the county’s unemployment rate exceeding 12 percent, there was little demand for industrial or manufacturing expansion in Clark County last year. The industrial market started the year at 13.5 percent vacant and will end the year at 13.5 percent vacant, with more than 1 million square feet of vacant multi-tenant industrial space available.
Last year was the third consecutive year of negative absorption of industrial square feet in Clark County.
With no new multi-tenant industrial construction planned for 2010, rental rates should stabilize at 40 cents to 45 cents per square foot on a triple-net basis. This forecast rental rate is down from 55 cents to 60 cents per square foot in 2007.
We expect leasing activity in the first half of 2010 to be slow, with a projected increase in industrial leasing during the last part of the year based upon new jobs and industrial production creating demand. Vacancy rates are forecast to remain at 12 percent at year’s end.
Retail
With total retail sales in Clark County down for the second straight year from the high of 2007, there was virtually no demand from new national retailers entering Clark County.
The exception for 2010 will be certain food service businesses, including fast-food and casual dining that will expand nationally, including into Clark County. The retail vacancy rate increased to more than 12 percent from the low of 4 percent in 2007, with over 1 million square feet of vacant retail space available for lease.
The retail tenant was king when negotiating with landlords regarding rental rates and other landlord concessions. Rental rates for newer construction fell 20 percent to 25 percent from the asking rates of 2007.
Vacancy rates this year are forecast to increase to more than 15 percent based upon continued weak retail sales during the year. No new multi-tenant retail construction is planned in Clark County.
Real estate investment sales
Investment sales were up 52 percent over last year, with a total sales volume of approximately $134 million. Two transactions represented over 52 percent of total closings in 2009.
The Hewlett-Packard site sale to SEH America Inc. and the 4400 Class A office building near Westfield Vancouver mall represented more than half of the total sales volume for the year. Without those two transactions, investment sales would have been flat compared to 2008 and 80 percent down from the highs of 2006 and 2007.
Land sales
Last year, commercial land and industrial land sales totaled slightly over $64 million. However, again, two purchase transactions, both by the Port of Vancouver, represented more than 73 percent of total sales.
The port purchased the old Alcoa and Evergreen Aluminum sites for expansion of its industrial and marine operations.
Land sales to private development and/or investments were the lowest in several years due to the lack of demand for new construction and available debt financing.
This year looks like another one of very weak volume for commercial and industrial land sales.
