Central Oregon’s most diverse commercial real estate company analyzes the successes of 2018, indicators for this year’s market.
As national media continues hailing Bend as one of the top places to live and work, Compass Commercial Real Estate Services wrapped up 2018 as its best year in the company’s twenty-year history. Factoring the current state of the economy, along with all indicators pointing to a strong commercial real estate market, they anticipate another great finish in 2019.
Market data from the national level and locally in Central Oregon tells a compelling story. Fourth-quarter economic reports from the U.S. Commerce Department revealed a 2017 growth rate of 2.6 percent, continuing one of the longest periods of economic expansion in U.S. history.
The Q4 2018 Compass Points® market report forecast was correct. “We’d predicted this trajectory would energize our ability to deliver the results you can expect from a team that has many professional accreditations, decades of experience and industry knowledge, and is dedicated to serving the needs of each client,” said Howard Friedman, partner and the managing principal broker for Compass Commercial.
A favorable market wasn’t the only factor driving remarkable results for Compass in 2018. Their expertise as the only commercial real estate firm in the region offering in-house asset and property management and construction services led to an exceptional year as well.
“Whether you want to buy, sell or lease commercial real estate, schedule tenant improvements, or consult with an asset and property manager to protect and grow your investment, we provide this for everything from office, retail and industrial to land and multifamily property investments,” Friedman said.
Why the 2018 Market Mattered
From Bend’s office and retail market to industrial and multifamily trends, the successes of 2018 were due to factors that will support another prosperous year. Bend’s office market vacancy rate dropped from 3.6 percent in Q4 2017 to 3.4 percent in Q4 2018. Lease rates held steady, too.
Last year, the office vacancy rate dropped for the eighth year in a row. In 2010, vacancies were 22 percent of the total market. Today it’s a fraction of that, with just over 87,000 square feet available.
Bend’s retail vacancies dropped at the end of last year, landing at less than 3 percent in Q4 2018, while rental rates held strong. “Restaurants and new retail projects are commanding high rates, despite the construction of many new projects,” Friedman said.
In the industrial sector, Bend’s vacancy rate dropped for the fifth consecutive year, from 3.3 percent in 2017 to an amazing 1.7 percent last year. In Redmond, those vacancy rates dropped for the seventh consecutive year, from 3.5 percent to just 1.9 percent in Q4 2018.
Office rental rates will remain strong as the supply in Bend remains tight. “This mirrors national trends as the economy continues its steady growth,” Friedman said.
Meanwhile, strong construction and labor costs continue locally. Some companies cite tariffs contributing to price increases in steel and appliances. This will continue to squeeze the office market’s supply. “Projects like Crane Shed Commons and Deschutes Ridge Business Park saw successful leasing during 2018, and there are few new office projects on the books for 2019,” Friedman said.
Robust Sectors and the Rent Question
Central Oregon’s retail market continues its robust growth and low vacancies. Last year, Compass Commercial cited a few projects that are still in the beginning stages, including the former Ray’s Food Place, to become Westside Village Marketplace, a mixed-use retail and multifamily complex, currently under construction. “Many redeveloped retail properties also saw strong absorption in 2018,” Friedman said.
In the industrial sector, rents are strong as the supply remains limited in Bend and Redmond. However, a decade-long collaborative effort was approved for industrial development on 949-acres south of the Deschutes County Fair & Expo Center in Redmond.
Multifamily building in Central Oregon continues. This has eased the housing crunch, but affordability is still an issue. Local community leaders are attempting to ease this, but it is challenging.
Oregon enacted residential rent control this year. “Something must be done to help our neighbors live and work without fearing homelessness or displacement from our growing region,” said Friedman, who is also CEO and board president of the Bethlehem Inn homeless shelter in Bend.
Some predict a national economic slowdown, but Central Oregon’s commercial real estate is not expected to be affected. “We predict it will continue to be strong, with rent increases slowing, but values staying robust in 2019,” said Friedman. “Capitalization rates (the rate of return on an investment property based on the income it’s expected to generate) should rise a bit considering increases in interest rates. All in all, we see a bullish market ahead.”
Do you have questions about Central Oregon commercial property market trends? Would you like expert consultation on leasing or selling commercial property, property management or tenant improvements? If so, the experts at Compass Commercial are ready to help. Give them a call at 541-383-2444.
*Statistics and quotes are from the Q4 2018 Compass Points®. To subscribe to the quarterly market report, go to compasscommercial.com/market-research.