SMALL RETAIL POPS, LARGE OFFICE PLUGS...Yesterday marked what I am confident is a turning point in leasing retail space as we finalized the first deal for "new business" of 2011. Not to dramatize the slowness of the market, in fact overall we have been very busy. There are several exciting deals (big ones) in progress and we have worked on a dozen or more renewals, office leases and listings for sale but this is the first fully final lease on fresh retail business in 2011 for either Dan or myself.
There are indications of market momentum from specific categories of commercial space users. For instance there have been several new business openings in the restaurant category including Bella Bistro, 10 Below, & Columbia Valley Brew Pub which all opened this Spring. With other restaurant concepts looking like they are on the way it seems local proprietors in the food category are gaining confidence. This is a nice change to what was a stiflingly slow start to 2011 retail business growth and I believe it is a positive indicator of "confidence" in our market for local start up business. This should result in helping local businesses establish strong roots while national & regional competitors play catch up evaluating and locating in the market.
2011 has also enjoyed a healthy level of interest from small office leasing (less than 600 sf.) which is typical; these tenants are far more mobile, with little cost consequence for moving and dynamic business structures. Small office is also highly competitive; "value" is critical to small business owners who have a keen sense of the market thus property owners must also have good market knowledge (or a good leasing agent) to land deals.
While the professional consensus, industry wide, indicates a plateau of vacancy & devaluation in large office assets, I judge that consensus to pertain, primarily, to large urbanized markets where general business growth originates. In my review of Wenatchee's commercial real estate market I see large office space (bigger than 1,200 sf.) as the most troubled category of commercial leasing. Office closings, downsizing and or mergers have taken an obvious toll on local commercial office buildings, showing lots of large spaces most of which have been available for over 18 months. Increased vacancy and long term vacancy create a cycle of competitive lease terms and reduced property values. I would expect this cycle to continue in our local market for the next several years due to the forecast of a slow economic recovery for general business. This can create a difficult situation for buildings that need large office & retail users to work.
There are always solutions to cure this problem but it will take some creative thinking & willingness to analyze short term vs. long term value. The most detrimental thought a commercial property owner can have is that this market will fix itself soon. Small pockets of progress in retail space & healthy small business growth are not indicators of a rebound in large office leasing. In a casual, well timed & self serving manor I would suggest seeking the help of creative & competent commercial real estate professionals (I know some you can call).
- Chaun