Jenn Limoges, CCIM and Principal Broker weighs in on the market by vertical:
RETAIL- Where did the staff go?
- Sale prices are heading down as are rents. New development rents have leveled off for now, as construction prices for materials have come down. However, considerable risk still exists around delivery timelines and inflation is of huge concern.
- After a robust return to dining, both indoors and outdoors, this darn Covid Delta variant is chasing off workers just as Central Oregon businesses were doubling down on their reopening plans. Stir this in with a little extreme heat and horrible air quality and we have a trifecta of new business challenges with no solution but to innovate and in some instances, cut their losses.
- Staffers are saying they’re ready to retire and or aren’t interested in the risks associated with being in the service industry. It’s ironic how many former service folks have found a second career in day trading bitcoin and collecting their federal stimulus checks while ‘Help Needed’ and ‘Now Hiring’ signs have popped up like post-it notes. Much to the dismay of those of us looking to get out of the house for a nice meal, many of our restauranteurs have had to cut operations by only being open for set one shift schedules and/or being closed for entire days of the week. No staff = no service.
- Those businesses that need in-person contact (tutors, music teachers, veterinarians, physical therapist, for example) are still growing strong and expanding their services as they have pivoted to Zoom-based services in addition to in-person services. Retail is still shifting based on the product delivered- whether a service or a widget.
OFFICE- School is starting. Childcare is hard to find. Cultures are shifting. Employees are less connected.
- Rents are heading down. Sales are slowing down. Much of this is seasonal as well; No one wants to move their office in the middle of Winter. Medical office may be the only winner as subleases with the hospital and their need for space to serve COVID patients is pushing those tenants to the market.
- With the Delta variant pushing decisions to re-mask again, companies are extending the work from home policies. We are seeing large office space sit on the market longer as corporate office users don’t want the liability associated with mandated in-office work. Long term plans for expansions are still up in the air.
- More and more we are seeing the loss of childcare options for families as more demand is put on those providers who weren’t able to weather the first COVID restrictions. Employers are requiring similar work environments from their employees who are electing to continue to work from home. We’re way beyond the barking dogs and crying babies in the background at this point.
- We know that the culture is suffering for those businesses and teams who can’t have that unplanned, spontaneous exchange on the elevator, or walking to the car at night or standing around the water cooler. However, many employees have outright refused to vaccinate, in addition to refusing to come back to the office if mandated to do so.
INDUSTRIAL- Hot, hot, hot!
- Remarkably few options to lease for 3,000SF or less all-around Central Oregon. Expect to see more speculative developments coming to market to meet the demand and lease rates topping $0.80-$1.25/SF/month NNN.
- Land is sparse. Owner-users who stopped their projects because of rising costs are back to the drawing table. Timelines for delivery of building materials as well as supply chain risks are starting to counterbalance the drop in pricing. Labor is still tight.
- Sale prices are at an all time high. If buildings are costing between $150-200/SF and a timeline of 12-24 months, buying at $250-300/SF is reasonably attractive to many Buyers with immediate requirements to expand. Rates are low and Sellers know they can push the market.
MULTIFAMILY- Seeking affordability.
- Long gone are the value-add deals. Under 4% cap rates on smaller duplexes and triplexes are still pulling in Buyers. Rents are still slated to rise making single-family residential (SFR) purchases attractive to investors.
- Pricing in SFRs are coming down, and really needed to since the height in June. Many Sellers aren’t ready to face the fact that the market is softening, but if they want to make a deal, they will adjust their sale prices down too.
- Overall, rents should stay steady if not rise.
- Affordable housing continues to be a problem. Tents are popping up, businesses and property owners can’t decide where to best place needed temporary housing. NIMBYism at its best.