Commercial Real Estate 2011 the Good and Bad

Commercial Real Estate 2011 Good and Bad, 2011 has been a little of each, Good, Bad and Ugly. Generally speaking what’s good for the Lessee is not always good for the Property owners and vice versa. This article will discuss what has been good and what has been bad in this ever changing commercial real estate market we live in.

The Good

The good news for LESSEE’s in the San Diego Commercial rental market in 2011 has been the availability of commercial rental space and the general decline in rental rates. If you will recall, back in mid to early 2008, occupancy levels had gotten so high (less than 1% vacancy) pretty much across the board, that there were waiting lines for commercial space. With the high occupancy levels came some of the highest rental rates San Diego has ever seen. When space would come available, generally there were two or three companies negotiating to lease it. The length of time a space would sit idle without generating income was almost non-existent, turnaround times were lighting fast.

Today our rental market has changed quite a bit. Lessee’s have a wide range of spaces to choose from in almost any of our sub-market’s. Rental rates in most Sub-markets are down from their 2008 highs by 20% to 40%. Depending on the Sub-market, Commercial tenant’s will generally find concessions, Tenant improvement allowances and free rent have all gotten pretty generous.

The good news for San Diego Property owners in 2011; is there any? It depends on how you look at it and when and where you purchased your property. If you purchased the wrong Commercial property in our market at the wrong time you probably don’t see anything good about this market. However, if you have owned your real estate in for a long time and carry low or no debt; or recently purchased your commercial property at market adjusted prices, you are probably generally happy with the market.

In 2011 San Diego commercial property owners saw rental rates firm up, rates are not free falling any more (that’s good), occupancy levels in our Commercial market have stabilized; in 2010 leases were not being renewed and vacancy levels rose fairly quickly, however in 2011 renewals of commercial leases are taking place once again and occupancy levels have stabilized (that’s good). The competition is still high in our Commercial Real Estate market, but generally things have firmed up for Property Owners in 2011.

The Bad

The bad news is not specific to San Diego Commercial tenants or owners, the bad news is the economy in general and that impacts everyone. Granted some businesses and some property owners flourish in bad or less then good times, that has always been the case and probably always will be. Generally speaking, Commercial Real Estate in San Diego will hold its own from now until November 2012, beyond that it’s anyone’s guess.