Commercial Report – Year End-2017
A year end report is of interest but the focus is really to develop an idea of the year ahead. Where do we seek the best glimpse into the future vitality of our economy? My vote is Business people. They are the best prognosticators as they are in the trenches daily. They are cautiously optimistic. Predictions are that we will see a good 2018 in the commercial real estate market.
The housing market is often a leading indicator of commercial market trends. Chico has seen another robust year for home sales. There were 1,370 sales reported through the MLS in 2017 compared to 1,423 in 2016. Those homes prices increased by about 6% on a per square foot basis. It is likely that the fewer sales in 2017 is due to lack of inventory rather than lack of buyer interest as new subdivision sales prices increased well above the 6% mark.
Chico’s commercial lease market remains balanced. Vacancy rates are well below historic ranges. The number of tenants seeking space has been down as well during 2017. The low vacancy rates are putting upward pressure on rents as landlords gain confidence.
The buy-sell sector volume was down for 2017. This is true when measured by the number of sales and the overall volume. The consensus of local commercial brokers is that the sales decrease is due to lack of inventory rather than lack of buyers. Buyers with solid financial backing continue to actively search for new commercial assets. The good news is that buyers remain focused on the fundamentals of real estate investing. Prices are rising but only marginally.
New commercial construction continues to be limited. Construction costs continue to rise which adds value to existing properties. We are seeing properties being repositioned, either through renovations or demolished and then replaced by a new building. A house/office was torn down and a new medical office built on East Avenue. A warehouse was converted to a brewery and tasting room on Meyer. Another warehouse was converted to a distillery on Park.
Coldwell Banker Commercial continues to be a major participant in Chico and the region. Our brokerage team continues to enhance our professional skills and knowledge of the market. Please contact me with your real estate questions and comments. I can be reached at 530-896-3168 or at email@example.com. I appreciate the opportunity to represent your real estate interests.