Vacancy finished the year at 8.3%, up from 8.0% in 2007.
Net absorption is 500,000 square feet, down from1.6 million square feet in 2007.
Optisolar’s lease in McClellan Park is responsible for 500,000 square feet of net absorption.
Demand from smaller users, especially those that occupy less than 4,000 square feet, has diminished significantly in 2008.
Large distribution users are more likely to locate in California’s Central Valley or Reno, Nevada due to competitively priced land and fees.
Construction slowed throughout the year; there is a significant disconnect between market lease rates and new project proformas.
Asking lease ease rates held relatively flat throughout the year, but in most cases leases are being done at 10-20% below asking rates.
OUTLOOK FOR 2009
2009 will see vacancy increase only slightly due to a limited supply of industrial buildings and a lack of new construction.
While asking lease rates may decline slightly in 2009, in many cases, leases will continue to be signed at 10-20% below the asking rate.
Net absorption will be minimal in 2009.
With an abundance of small buildings on the market, the ability of large users to locate cheaply in the Central Valley or Reno, non-competitive fees, and high costs, new construction in 2009 will be minimal.
There will continue to be a large inventory of small owner/user buildings available in 2009. As financing continues to become more difficult, there will be less qualified buyers in the market. In addition, until prices drop considerably, most small buildings will not pencil for investors. Expect to see some bank owned owner/user buildings in 2009.
COMPLETED CONSTRUCTION
NET ABORPTION
VACANCY RATE
2009 FORECAST
