Housing Trouble Spills Over into Commercial Real Estate

From the Voice of Sandiego: (hat tip Tyrone)

The slump that has plagued the San Diego County housing market is beginning to show on the commercial side.

The trouble defies the industry mindset, prevalent even up until a few months ago, that commercial and residential real estate share little more than a surname -- that the health of the real estate market for apartment investors, offices and industrial space would remain untouched by the housing market's troubles.

"I think we'd all like to think that the meltdown in the housing market hasn't affected the commercial side," said Kraig Kristofferson, senior vice president with CB Richard Ellis. "But the reality is people look at real estate in one big basket, often."In a direct correlation, the cutbacks in the San Diego operations of local and national homebuilders and other housing-related companies sap some demand for commercial space.

National homebuilder Lennar, for example, recently listed 50,000 square feet of its office space for lease to other tenants in order to cut costs, said Jason Hughes, principal with local firm Irving Hughes. And then there are mortgage companies, title companies, escrow companies -- going out of business or cutting back on staff, and space, he said."It goes on and on," Hughes said. "Anyone that says that residential is not affecting commercial is nuts, because it simply is. There are a ton of tenants who are in a difficult situation because of the housing market, residential real estate offices are closing their doors. ... And that's happening at the same time as the credit crunch."