Tuesday, April 17, 2012

Commercial Rentals- How low can the rates go?

With industrial space vacancy on the rise (see Market Activity- Where are all the big industrial property deals?) rents are still showing weakness with only slight signs of heading upwards and it continues to be the tale of two markets. Class A rents are stable and set to increase when a few more large industrial real estate transactions occur. Whereas Class B & C product still languishes with years of supply. Owners of older product have been on their knees praying for 3 years now. The reduced size of the average transaction (20,459sf compared to 41,205sf from the prior three quarters) helped the cause of Class B & C this quarter. Class A buildings typically do not divide into small increments. So, when transaction volume does well and the average deal size is low, like this quarter, Class B & C product sees greater activity. Of the 20 largest industrial property transactions of this quarter, ranging from 13,800sf to 77,000sf, 15 of them (or 75%) signed within Class B & C buildings. With that in mind, there is plenty of competition amongst owners of older buildings, keeping rents low and many prayers unanswered.
Contact NAI Alliance at 775.336.4600 for all of your commercial lease needs.

No comments: