PROVIDENCE – Rhode Island’s commercial and industrial real estate markets this year have slowed, as the residential housing crisis has turned into an across-the-board financial meltdown. And it is unclear just when the next upswing will begin.
That was the overarching theme at this morning’s 2008 Market Outlook Rhode Island breakfast, presented by CB Richard Ellis-New England’s Providence office.
The firm’s brokers, along with panelists, analyzed the last four quarters and looked ahead to the 2009 market.
“The current statewide vacancy of over 2.3 million square feet will only be absorbed as the economy expands,” said CBRE Executive Vice President and Partner Jay Fluck. “Some are suggesting that we are at least six months away from a turnaround, while others are predicting no rebound until 2010.”
The statewide office space market is now at 13.39 million square feet, 17.36 percent of which is vacant. At the end of 2007, there were 13.67 million square feet with a 16.05-percent vacancy rate, according to the firm’s 2007 market recap. (READ MORE) And while annual net absorption was 100,386 square feet last year, this year’s net absorption has been a negative 279,876 square feet.
Fluck added that commercial real estate “rebounds” in the Ocean State have been “very sluggish compared to other regional market and I would plan on a longer rather than a shorter downturn.”
In the industrial market, Vice President Michael Wall said, local companies are “taking a more cautious approach to their real estate decisions,” which has started to erode demand.
“The industrial vacancy rate is tracking at 8.6 percent for the year, which is up 0.6 percent from 2007,” he said.
The 8.6 percent is closer to the 8.3-percent vacancy rate the state saw during 2006, but is well above the 2005 industrial vacancy rate of 5.7 percent.
With several older mill properties being renovated, the total industrial market size this year shrank from 49.4 million square feet to 48.2 million square feet, Wall said.
He said the sale of industrial buildings typically is the most active segment of the Rhode Island market, but sale prices have dropped – currently running about $30 to $85 per square foot – and buildings are staying on the market longer.
“In the face of credit crisis and rising unemployment, we’ve seen a drop in the number of transactions,” Wall said, adding that there’s been an increased focus on leasing space between 5,000 square feet and 20,000 square feet.
Today’s statistics show a less-confident commercial market even than the firm’s “Mid-Year 2008 Market View,” released in September. (READ MORE) At that time, CBRE reported a 35,388-square-foot net absorption in Providence, led by high rates of absorption in the Capital Center, Financial and Westminster submarkets.
CB Richard Ellis Group Inc. (NYSE: CBG), a Fortune 500 company headquartered in Los Angeles, is one of the world’s largest commercial real estate services firms with about 14,500 employees at more than 200 offices including downtown Providence. Additional information is available at www.cbre.com.
