Commercial Real Estate Is Booming

Driven by unprecedentedly low interest rates, the commercial real estate market in Ventura County is expanding in ways that hark back to the boom days of the 1980s, analysts said Wednesday.

Real estate experts at the third Ventura County Commercial Real Estate Symposium in Oxnard said commercial vacancies in the county plunged across the board--from the retail to the industrial sectors. And the biggest dip was in office real estate.

“Since 1985, I have never seen the [office] vacancy rate lower than it is today,” said Michael Slater, senior vice president of the real estate company CB Richard Ellis in Ventura.

Overall, the county experienced strong economic growth in 1998, said Mark Schniepp, director of the Economic Forecast Project at UC Santa Barbara.

Employment accelerated--8,500 new jobs were created in 1998, a record for the decade. And home sales were explosive, Schniepp said, with more homes sold in 1998 than in any other year in the ‘90s. In addition, he said, home prices are going up.

“We’re not where we were in 1989,” he said. “But we’re getting close.”

The overall strength of the economy helped fuel growth in the commercial real estate sector.

Growing demand in 1998 triggered a drop in retail vacancy rates, which fell to 7.6% in west Ventura County and 4.3% in the east county, according to Larry Tanji, senior associate at CB Richard Ellis.

While Tanji said the east county always has a “pent-up demand” that keeps vacancy rates low, he expects rates to drop further in Ventura, Oxnard and Camarillo, where several vacant “big-box” spaces are about to gain tenants.

The industrial real estate sector is in the middle of a long, sustained development curve, said Paul Farry, first vice president for CB Richard Ellis.

However, Farry predicted an uptick in vacancies for the first half of 1999--at least in Simi Valley, as new development opens up.

Farry also predicted that land prices will continue to rise by another 20% in 1999, and that industrial rents will soar 11% in the west county and 20% to 25% in the east county. He predicted that industrial investment and construction will remain steady in 1999.

But the most intense movement of 1998 was in office real estate.

Because Ventura County is along Southern California’s technology corridor and businesses can receive significant tax savings if they leave Los Angeles County to set up shop in Ventura County, office space development has exploded.

The city of Ventura’s office space vacancy rate dropped from 21% to 13%, Oxnard’s dipped from 16.6% to 14.8%, and Camarillo’s nose-dived from 16.9% to 8.9%.

In the Thousand Oaks area, office vacancies decreased from 12% to 6.7%.

“I have never seen so many deals done in county history,” Slater said.

Despite the across-the-board growth in the commercial real estate market, analysts warned that the overall economy remains changeable, which may have repercussions for Ventura County.

“We remain somewhat vulnerable to the overall volatility of the stock market,” Schniepp cautioned.

Bill Rothe, a director for global research and consulting for CB Richard Ellis, agreed.

“We live in a volatile age right now,” he said, likening this period to the Belle Epoque at the turn of the century in Europe--when 30 years without war led to a flowering of the arts and economy.

That ended when “a Serbian anarchist assassinated an insignificant royalty of a declining empire”--a tiny spark that ignited a continent to fight World War I.

He said that just as small an incident could throw the current world economy into turmoil today.

“Real estate is local business,” he said. “But it has global implications.”