Bend Commercial Real Estate Impacted by Lack of Inventory
Historically, our local commercial real estate market trends above the national averages. Our Central Oregon area commands very aggressive CAP rates due to supply and demand; when you put a magnifying glass to our market, we have very little Industrial property For Sale/For Lease and it would appear that the Urban Growth Boundary expansion recently passed will not solve this immediate problem. Our local market in most cases this year has positive absorption rates for office and retail as well.
What’s Up on the National Front?
Our local commercial real estate market trends about a year behind what we experience in the residential market. This is consistently true and while residential real estate sales experienced a sudden recessional impact in 2008, commercial real estate sales stayed consistent until roughly 2nd quarter 2009 and then fell into distressed “short sale” or “deed in lieu of foreclosure.” Commercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. In terms of inventory, commercial real estate markets are bifurcated (divided in two parts) with the majority of buildings nationally and our local market small, while the bulk of commercial space is concentrated in larger buildings.
This concept continues along with transaction volume as well, with deals at the higher end ($2.5M and above) comprising a large share of investment sales, while transactions at the lower end make up a smaller fraction.
Third Quarter 2018:
Commercial sales volume rose by 1.6% on a yearly basis, as cap rates moved sideways. The shortage of available inventory remains the principal concern for investors and for brokers. Commercial prices advanced at a slower 1.4% year-over-year rate. Leasing activity trended upward as vacancies experienced upward pressures.
Retail and office space are pretty tight right now and we are seeing this in our local market as well. Across the board in all sub-specialties of commercial, inventory remains low and some investors are in a state of flux right now due to FED rate concerns, the stock market and an overall softening of the market.
The strongest market nationally 3rd quarter 2018 is Orange County, California. Phoenix, Arizona leads the pack and outperforms the national averages for retail, especially for national chain and retail restaurant sales and leasing.
OUR LOCAL AVERAGE CAP RATE IS 4.87%, and rarely do we find anything over 5.5% in our current inventory. The national average CAP Rate is 6.8%.
INVESTMENT SALES (PER SQUARE FOOT).
What Are Our Predictions for Bend OR Commercial Real Estate?
Overall the consensus is the market is slowing due to tenants and investors becoming more cautious. We are probably seeing consumer confidence, FED rate hikes and global economic factors being a consideration for this which is what we are seeing on the residential real estate side as well. The overall commercial national market has leveled off, the price of construction is up and not in balance with adequate ROI. (Return on Investment).
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