I attended an economic presentation today co-sponsored by the North Bay Association of Realtors and the Women’s Counsel of Realtors.   Here is a summary of the California Association of Realtors initial forecast for the statewide housing market for 2014.

2014 CAR Housing forecast:

Single family home sales +3.2% over 2013

Median price: +6% compared to +28% in 2013

Mortgage rates +1% from current levels.

The Commercial Office Market in Sonoma Co. – 10/23/13

If you are interested in the commercial office building market in Sonoma County, the following was presented by Joan Woodward, President/CEO of Simon Woodward.

There is 13.8 M sf of ofc spc. in Sonoma Co;  2.8 M sf of that space is vacant; an additional 200,000 sf is available for sublease.  This results in a 22% to 25% vacancy.

Landlords are restructuring leases on “the amount of space needed” by their tenants, instead of the amount of space occupied. The un-advertised sublease space is substantial

2006 avg rental rates $1.95;  2013 = $1.60 and is declining

There were 230 office lease deals in 2006 in Sonoma County.  There have been 60 ofc lease deals ytd in 2013.

Reasons:  Loss of jobs;  Business closures and bankruptcies;  Telecommuting has grown from 10% to 17% of all employees;  Space/sf/employee reduced from 250sf to 150sf.   The Accenture headquarters in NYC has 56sf/person

Financial impact:  Loss of $.35/sf  x $13.8M = $58M/yr

Cap rate of 7% = $828M lost value or negative $60/sf.

Vacant space @ $1.60/sf = $57.6M/yr in lost income

There is no cash flow for capital improvements

80% of tenants in Son. Co. are less than 3,000sf

The only office owners with 15% annual Return on Investment are those who have acquired distressed office buildings at heavily discounted prices – i.e. REO sales.

15,000 office workers are needed to get the vacancy to 7.5%

A good book on the effect of these trends on local communities is:  “When the Boomers Bail: A Community Economic Survival Guide”  Mark Lautman

“Economic jobs” – produce income to the area from out of the area.  These are needed for a healthy local economy.