When the financial services industry bottomed out in September 2008, the commercial real estate market felt the effects. Reluctant lenders, combined with a contracting economy, led to a rise in vacancies and a weak market overall. Providence-based Rodman Real Estate’s 2009 Midyear Report said that in Rhode Island, the decline that began in the fourth quarter of 2008 continued through the first two quarters of the year.
Rodman Vice President Neil Amper recently spoke to Providence Business News about the market and the mid-year report, and while he says that the market remains weak, he does see a rebound on the horizon.
PBN: What is the current state of local market?
AMPER: The commercial market, although not as depressed as the residential market, has gone through some price adjustments and contractions.
There still have been some significant sales and leasing for owner-occupied situations. We are seeing more activity in the last two months than we have seen since the third quarter of last year.
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PBN: The mid-year report said that the downtown Providence market has been hit harder than other areas of the state. Why? Will it take longer for downtown to rebound?
AMPER: Recessions force companies to contract and seek more economical space, but the amenities of downtown – such as the abundance of restaurants, residential [developments] and services to accommodate people – will again draw companies to expand downtown. … Generally, all areas come back at the same time. In Rhode Island, it [tends to be] a pretty even recovery when [things rebound].
PBN: The report said that suburban landlords are finding some success. Are companies less concerned about their location right now?
AMPER: Location is always a component of any relocation. Companies want to retain their best employees and do not want to inconvenience them with a longer commute. … But [suburban landlords] are offering free rent and reduced [to offset moving costs for potential tenants].
PBN: Can you talk about the state of the office market versus the industrial market?
AMPER: The industrial market has been contracting for some time … for about a year, year and a half. Overall the vacancy rate has been fairly stable, although we have seen sale and lease prices begin to fall. [Since the start of the recession], the office market has contracted more than the industrial market and lease rates and vacancies are rising.
What happens is the national and regional companies are the first companies to shut down their offices in the recession. They’re the ones that pull back in a recession. The local people, you don’t see much change. The national and regional companies may shut down their Rhode Island office when their lease is up, but they’ll come back when the market starts to come back again.
PBN: Do you see a rebound in the market’s near future?
AMPER: I think we may see some rebound after the first of the year if we continue to have the stability in the economy that we are staring to see.
We’re getting more calls across the board from smaller users – people who are normally hurt first when the economy slows down. I’m getting calls for smaller office and retail space from smaller firms. They’re looking either because they think it’s a good time to upgrade or because it’s time to jump back into the marketplace. They’re not yet translating into activity. But you start with the phone calls, and the phones have been much busier in the past two months.
