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Government Column
Will New jobs Help Commercial Properties?Dec 12, 2011 Jack Katzanek
However, it could take many more new jobs and probably a serious improvement for the area's struggling housing market before the office market improves in San Bernardino and Riverside counties, people that follow commercial property transactions say. The University of Southern California's Lusk Center for Real Estate on Wednesday released its annual Casden Report, which looks at commercial real estate in the Inland area and Orange and Los Angeles counties. The report, prepared using research from commercial services firm Grubb & Ellis, tied recent job growth to some of the fresh demand for industrial and office space. In the Inland area, that might be half-true. Industrial vacancies declined sharply in the most recent quarter and have dropped much faster than the vacancy rates in the coastal counties. The Casden Report cited significant improvement, and vacancies in the Ontario area are the lowest in Southern California. But the job growth in the last two months, while good news to people in the Inland area, will probably not fill much empty office space. The state reported more than 15,000 new jobs were created in September and October. "I'm very much encouraged after a number of years of slugging around in the cellar," Bob Wolf, who's retired from his development firm Germania Corp. and now works as a consultant, said of the latest job reports. "But it will take a lot more of that job growth before we see more ancillary services that populate offices." Wolf said interest in office space will probably be a byproduct of more warehouse development. That will spur the economy in general, which eventually will draw lawyers, dentists and accountants to Inland cities. Also, he said a lot of existing offices have learned to operate with less space and will continue to do so. "They'll hire someone and just tell them that their desk is over there," Wolf said, Redlands-based economist John Husing said the area's office market was heavily overbuilt in 2007 when the residential real estate markets crashed. The vacancy rate is still at 23.8 percent because a lot of that space was built in the mid-2000s to accommodate residential development firms. Now it will take a comeback in housing to get that space occupied again, and Husing said that could take several years. "If employment grows fast, it may cause some demand, but we probably have to solve the housing problem first," Husing said. Rents fell 6.3 percent in the last year for the Inland area's larger office buildings and 2percent for smaller ones, according to the report, and that's what is keeping some office tenants in place. Jim Nadal, senior vice president for Grubb & Ellis/WestMar in Temecula, said vacancies in that region have dropped slightly in the last few quarters, and he said that's because of declining lease rates. "I don't see a correlation between a decrease in unemployment and stability in office vacancies," Nadal said. Source: (c)2011 The Press-Enterprise (Riverside, Calif.) |
