Commercial Investment Real Estate

MAR-APR 2015

Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.

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29 March | April | 2015 CCIM.com Rockland, Maine. Erickson covers the mid-coast area of Maine, which is home to about 114,000 people. Maine overall is about 16 to 18 months behind the national trend in terms of economic recovery, Erickson says. Portland, Maine, seems to be a little bit busier, but growth has yet to trickle down to the towns situated in the mid-coast area, he says. T e mid-coast market is driven largely by its existing business base. "Right now, although we have a very good job market, we're not f nding new companies coming into the area for a number of reasons," he says. Erickson predicts that it will take another year to 15 months to f ll the excess supply of space due to the low demand. Erickson adds that existing of ce tenants are still downsizing to some extent, particularly in the healthcare sector where some physicians and medical services are relocating to be closer to the main hospital in Portland. Companies across the board are being cautious about expansion and new growth, while some are also choosing to stay put in existing spaces and renegotiate lower rents. In two recent lease deals, it took Erickson nearly a year to f nd a tenant to occupy a 6,500-sf space and about f ve months to f ll a 5,000-sf vacancy. "It is slowly coming, but it is going to take a little bit more time to catch up with the national trend," he says. Leasing Activity Returns T e gap between the "haves" and the "have nots" is expected to narrow in 2015 as the economic recovery continues to expand beyond energy and tech sectors. T e drop in oil prices also will temper the rapid growth in some markets such as Dallas and Houston, at least in the short term. Many metros have already started to see an uptick in leasing activity. During the latter half of 2014, tenants started making decisions again, says Terri Dean, CCIM, a broker/senior director and vice president of operations at Sperry Van Ness Avat Realty in Huntsville, Ala. Huntsville weathered the recession bet- ter than many metros, but the city was hit by government sequestration in 2013. Huntsville has a strong concentra- tion of government contractors related to NASA and the Redstone Arsenal, and sequestration created a lot of uncertainty in the market among civil companies. "They were cautious about renewing leases and renting spaces, because they weren't sure if they were going to get any more contracts," Dean says. Although leasing activity is returning, tenants are still being cautious and making smart decisions about what they lease, she adds. Companies in general are just leasing the space they need and not accounting for future growth. "It is harder to lease the really big spaces, but it is moving again," she adds. T e of ce vacancy in Huntsville declined to 12.1 percent in 4Q14, which is down 70 basis points compared to a year ago. OFFICE TRENDS: NET ABSORPTION VS. VACANCY Based on 79 metros -24000 -20000 -16000 -12000 -8000 -4000 0 4000 8000 12000 16000 20000 Vacancy Percent Net Absorption Q12007 Q22007 Q32007 Q42007 Q12080 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 10 12 14 16 18 20% Source: Reis Inc. CLASS A VS. CLASS B/C OFFICE VACANCY TRENDS 3Q2014 15 16 17 18 19 20% Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Class A Class BC Source: Reis Inc.

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