Part 2
We hear it is a “buyer’s market,” and no doubt it is for the average homebuyer. But is it for the commercial real estate buyer or seller? It goes back to basics: location, location, location. Today, Redding is not in the right location.
A few years ago, commercial buyers were looking at Redding like the “next heaven.” Apartment buildings sold for as little as $20,000 per unit in some areas; commercial retail buildings were few and far between, and what was available was selling. It was priced below similar buildings throughout the state and commercially zoned land was available at a reasonable price compared with the rest of California, especially the Bay Area. The result was a lot of commercial sales activity. And, as is the case, retail growth follows residential growth, so much of the available retail commercial land was rapidly purchased and overall commercial development was on its way.
Hilltop Drive is probably the best example, if you look at what has happened in the past few years north of Mt. Shasta Mall. Seems like almost overnight had Best Buy, Michael’s, Kohl’s, a new look and a wider Hilltop Drive.
As the residential market slows, so does commercial development and sales, especially in contrast with the rapid commercial development we have experienced. We saw not only retail expansion and growth but also a surge in office and professional building construction. From the attractive office-and-retail areas on Hartnell Avenue south of Cypress Avenue to the impressive medical building at East and Butte Streets, all of a sudden we had more space than tenants could use. Understanding economic supply and demand, the cycle continued, and now we have more commercial real estate supply than demand. This supply is not limited to one area either; empty offices and retail space are found all over the Redding area. Beautiful offices on Victor Avenue are still vacant, as are retail locations downtown, along with the huge office building opposite City Hall on Cypress. Smaller offices around town seem to be more in demand, but supply is quite limited.
There are still some good buys, but buyers are looking with a greater sense of “does it make sense financially?” The good prices we enjoyed a few years ago are not there now. Although we are still far below big city prices. we are not low enough to recapture that volume of buyers.
A good friend asked me recently if he should sell his commercial property, and I told him the essence of what I just wrote. I told him that if he doesn’t have to sell now, he may want to wait the market out for maybe the next year. Not good news if there is urgency, but he is making income from the investment and paying his mortgage, and the tenant has a good lease so he should be fine. This applies to other owners who are considering selling: Patience may be a virtue as it applies to commercial real estate in Redding in August of 2008. Along with location, timing is everything.
Ron Largent is a Realtor, business owner and longtime Redding resident. He can be reached at ronlargent@yahoo.com or ronlargent.yourkwagent.com.
If you have an opinion on a local topic and would like to share it with Food for Thought readers, drop a note to attndoni@gmail.com to get guidelines for writing.
