What’s happening in Washington County commercial real estate, and when will the vacancy rate begin to decline? These questions and more were discussed at a recent breakfast forum hosted by Westside Economic Alliance. I had the pleasure of joining Jeff Borlaug, Felton Properties, and Blake Hering, Norris Beggs & Simpson, to share our collective insights on market hotspots, recent trends and the outlook for the future. There were four key takeaways:
- Market demand has improved. The good news is that the vacancy rate has finally dropped from a high of 38 percent down to 10 percent, and is heading lower. Demand has caught up with supply and landlords are in the driver’s seat.
- No longer a tenant’s market. Landlord incentives have shrunk dramatically from where they have been. Tenants need to look closely at their lease option renewals and understand what they mean so they can act fast. Businesses need to focus on their space needs and start planning for expansions today, even if growth is a few years out.
- Nike’s expansion is having an impact on the availability of space. Right now Nike is absorbing local square footage but no one knows how much they’ll give back when their campus development plans are complete. There’s lots of speculation but few answers. Owners and brokers are watching to see how this story will unfold.
- No new development on the horizon. The real puzzler is in knowing when the market will be ripe for developers to build again. Lenders are still skittish about making loans on real estate projects that aren’t already occupied. Our best guess is that vacancy rates among flex/office and industrial properties will have to decline further and stay down before we see much in the way of new development.
Without new development coming online, the supply for all types of space is tight and getting tighter. There are still good opportunities for new and growing business—make sure you are working with a knowledgeable broker who can source the right opportunities for you.