Monday, September 15, 2008

Commerical real estate market crumbling.

Where were these experts in this article when I was predicting a crumbling in the market? I know, they were cheer leading and talking their book. We are only in the early stages of this CRE bust. I have driven around town and there are many developments with zero or only a few tenants. As the Great Unwinding begins both the strong and weak hands will fold.

From the Bakersfield.com:

Victims of bad timing and economic conditions that have clobbered mom-and-pop store owners, Bakersfield’s independent retail market is struggling to an extent not seen since the 1990s.

The vacancy rate among Bakersfield’s standalone shopping centers has reached about 13 percent — double what it was a year to 18 months ago, according to Scott Underwood, a broker at Grubb & Ellis/ASU & Associates.

“It’s going to be a while before all this retail space is absorbed,” he said.

9 comments:

Franky said...

For Bakersfield you are right...The CRE market is in trouble. However, nationwide CRE is significantly different from residential RE. There is an oversupply problem nationwide in residential RE. CRE was never over built on a nationwide scale. It will not suffer from a mass pool of unsold space such as residential has. Commercial real estate is also valued completely different from residential real estate. Commercial real estate's value is based on cap rates. In residential...the money available to average households seems to have determined the price of property (that's debatable). My point is-- the CRE market should not even been compared to the crash in residential real estate because it is fundamentally much different.

Also, think about this.... since there never was an overbuilding nationwide in commercial real estate... and since the credit crunch has cut off all funds to commercial real estate developers... there is a huge potential (when the economy recovers) for a massive shortfall in CRE space. Thus a potential for much higher rents. And according to cap rate valuation... this would mean significant appreciation in CRE assets.

It could be 5 or 10 years before large CRE developments can get funding. A 5 to 10 year period of almost no CRE development is an investors dream come true. The insiders of the CRE industry know this but haven't been talking too much about it. I do know many in the industry are gathering as much funds together as possible to buy CRE with or without the financial banking recovery, and with or without a CRE crash.

Bakersfield Bubble said...

WOW!!

Just checked today's stats...lots of hits. Looks like people are worried about something? :)

Bakersfield Bubble said...

franky - lmfao!!! Then buy, buy, buy...

Ichabod said...

Hey franky, welcome to

Bakersfield Bubble
Bakersfield's Official Real Estate and Economic Site


The Nationwide Bubble Real Estate site is THAT way... LOL!

desmo said...

Franky, what a jerk. Open a candle store. CRE never overbuilt?, read Mish's blog. Here in the Santa Clarita Valley, I see brand new strip centers opening without any tenants. Next time you guys drive up the I5 check out the new center at the 5/126 intersection. Franky must be the broker because it is 100% vacant.

Anonymous said...

Franky, Franky, frankly you should check out strip centers everywhere in CA from Indio to Silicon Valley, then proffer the opinion that CRE isn't overbuilt in CA.

I have swamp land in Temecula that I'd be willing to sell you...and, if you build it they will come.

Anonymous said...

This "Franky" character is reposting garbage (that piece is really popular on Yahoo! Finance). Here's a hint, that "argument" is about three years too late.

In other news, residential home prices are skyrocketing! Buy a house today in 2005, and by 2010 it will quadruple in value!

Bakersfield Bubble said...

LMFAO!!


No one should be surprised by this...

Anonymous said...

I was looking forward to buy my first house and was considering buying a "Condo/Townhome" and later convert that into an income property.

I am in Bakersfield on a 2 year assignment (oil industry) - moved in March )08 and was earlier considering buying a starter house (1700 to 2000 sq ft)...BUT MANY THANKS to Bakersfield Bubble forum and I restrained and am now renting an apartment.

Also, on doing some reading I found that the Condo market has been very stable in Bakersfield market....any views if the condo prices may drop any more?

I was looking for condos/townhomes at the University area and was wondering if I should be looking at other areas....advantage being that I can rent it to college students...when i move out of bakersfield...