Like the rest of the nation, the Redding commercial real estate market had a long period of market correction and stabilization which lasted up until this last year. These market corrections could be seen with examples like the distressed sale of the building across from City Hall for $0.35 on the dollar, or the newly remodeled and rebranded River Bluff office building in the former State Comp building on Hemsted drive on the bluffs. Although there are a few distressed commercial sales still in the pipeline, 2012 marked the end of our local market correction and in 2013 we’ve seen confidence returning to almost all sectors of our industry.
There are two commercial real estate sectors that are hot right now:
Retail is coming back hot and heavy with many retailers looking to expand in the Northern California region. Watch for the retail vacancy in the market to shore up pretty quickly over the next year. However, changing the bad stigma of any specific shopping center will not be easy because retailers travel in herds and they’ll pay top dollar to be next to each other. So if there is much vacancy in a given shopping center, it will still be a battle for tenants.
Good quality investment properties with long term tenants are being sold as fast as they’re put on the market. In fact, I don’t expect to see many good investment properties even hit the market this year, as they’ll likely be sold as soon as they’re listed. Many investors are weary of a stock market drop and are looking to real estate for something tangible that will go up with inflation, whenever that hits.
On the other hand, there are two commercial real estate sectors that have not come back and will likely stay dormant for the remainder of this year:
Even though the aging Baby Boomer generation is 79 million strong and looking for great healthcare, the medical office market in Redding has come to a standstill while the industry figures out how to be profitable with the Affordable Healthcare Act. With uncertainty about reimbursements and profitability, many physicians are choosing to stay put, not expand, or sometimes even close shop and go work for one of the local hospitals. Consequently, the demand for all medical space is non-existent, but I foresee this as a dam waiting to break as our patient population increases without easy access to healthcare. Medical office demand is bleak now, but it is expected to come back in late 2014, early 2015.
Lastly, the professional office market in Redding has been slow to lease up vacant space and will likely continue its dismal pace for the remainder of this year. Much of the movement in the market, was just that, movement from one office to another, while local tenants took the opportunity to upgrade from older buildings to newer locations with landlords eager to remodel or build new floor plans for them for equal or lesser rents. The office market is expected to continue to have very slow growth this year, with no new development unless it is owner occupied. Hence the reason why fully leased investment properties are so hot right now.
About Chris Haedrich
After graduating with a degree in Global Studies from University of California Santa Barbara, Chris joined the firm in 2005 planning to stay as long as he was inspired and challenged …and he has never left. Chris is a CCIM candidate and member of the International Counsel of Shopping Centers (ICSC). When he’s not chasing deals or fly fishing through town, Chris has enjoyed several positions on various local boards, including the Greater Redding Chamber of Commerce, Redding East Rotary, One SAFE Place and Catalyst – Redding Young Professionals. In his previous life he was a fly fishing guide in Colorado, amateur videographer, and wannabe world traveler. Ask him about his climbing wall in his barn or most recent homebrewed beer.