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.