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About Us > In the News > Fundamentals for Small-Cap Properties Kept Weakening in January (2/23/10)

Fundamentals for Small-Cap Properties Kept Weakening in January
Tuesday, 23 February 2010
Commercial Real Estate Direct Staff Report

Fundamentals for small-capitalization properties have continued to deteriorate, according to Boxwood Means Inc., with key metrics such as rents and tenant demand weakening last month.

National rents were down across the board in January when compared to a year ago. The declines range from 3.34 percent to $18.94/sf for medical-office buildings, to 8.23 percent to $7.17/sf for industrial properties. Office properties in general saw a 4.04 percent decline in rents to $17.57/sf, while retail properties have seen a 6.31 percent drop to $17.55/sf.

When compared to a month earlier, rent declines ranged from 0.2 percent for medical offices to 0.74 percent for industrial.

Boxwood Means is a Stamford, Conn., research firm that focuses on small-cap properties, which it defines as those with less than 50,000 square feet. It compiles property-level operating and sales data through a partnership with LoopNet Inc.

It also compiles Days on Market, a calculation of how long it takes to rent vacant space that it uses as a gauge for tenant demand. It said the metric is at its highest level in nine months, meaning space is languishing on the market.

Despite the bad news in the data, Boxwood Means noted that declines in rents and demand are no longer as steep as they were in previous months. But it cautioned that fundamentals would continue to weaken until the national jobs picture improved and consumer confidence rose. Today, the Conference Board reported that consumer confidence had fallen sharply this month.

Boxwood Means noted that even though consumer spending has increased steadily over the past few months, that hasn't been enough to make an impact on retail properties, which have witnessed a continued decline in rents and demand for space.

For instance, shopping center space was on the market for an average of 216 days before being leased.

Meanwhile, overall rents for retail properties fell by 0.48 percent since December, to $17.66/sf. Rents for street-front retail space fell by 0.52 percent to $17.56/sf; for space in free-standing buildings, it fell by 0.53 percent to $15.71/sf, and for other retail buildings, it fell by 0.49 percent to $17.11/sf. Rents for space in shopping centers fell by 0.51 percent in the month, to $17.69/sf, and for space in strip centers, it fell by 0.50 percent to $16.68/sf.

Demand for space in the office and industrial sectors remained stable in January, with office space sitting on the market for 182 days before being leased and industrial 175 days.

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