Foreclosures to hit commercial space

August 13th, 2009 | Tags: Foreclosure Business

commercial

Foreclosures are likely to sweep through commercial spaces. This will put banks in a tizzy as they have to handle many more souring loans.

The quarterly reports of Grubb & Ellis Westmar Commercial, point out that 120,000 square feet of office space came on to the market in the last three months. Although business is expanding yet the vacancy rate was at 22 per cent. In Lake Elsinore, the vacancy is more while in Wildomar and Menifee, the vacancy is less.

Experts say that a vacancy of up to 10 per cent is normal. Above that it is not. Jim Nadal, senior vice president in Temecula says that the situation is becoming quite desperate what with landlords hunting for tenants.

Nadal believes that the vacancy rate can be even higher if one considers the total space that renters are trying to vacate. Landlords are trying hard to rent out office space that was put in the market before the recession. In the future, 111,000 square feet will come into the market. A report says that developers got permits for $194 million for construction of commercial space. This has come down from $647 million that was set aside in the first half of 2008 and $819 million in the corresponding period of 2007.

Nadal says there has been no important development. In San Diego, there has been a sharp fall in construction. Brokers observe that vacancies are a golden time for renters to grab space at a cheaper rate. After all rents have dropped from $2 per square foot to $1 or may be even less. Nadal says a client has taken up 3,600-square-foot office space for a rent of $3,000. Although the client does not immediately need the huge space yet it took because of low price and planned expansion.

Mortgage companies had started vacating commercial space two years ago. However, home prices are at their lowest. As homeowners are vacating the homes, these spaces are providing the perfect pick-up for companies.
In San Bernardino County and Riverside County, 35,000 jobs have been cut, according to a report by the California Employment Development Department.

It is very difficult for landlords to cushion themselves against falling rent revenue. This was revealed by Gary Votapka, CEO, Mission Oaks National Bank, headquartered in Temecula. In Southwest Riverside County many commercial properties are in various stages of foreclosure. Not only residential but also commercial properties are in trouble.