Why Do Market Reports Matter?November 16, 2011
You meet with your commercial real estate broker or talk on the phone and he gives you a market report for your area. Why? Isn’t it his job to know all those rent, vacancy and absorption numbers? Why should you care? The answers are important for your current and future business and may help you make business decisions aside from real estate.
Commercial real estate market reports show what’s going on in the economy on a macro-level. Every good market report will show you more than just numbers. There will be an explanation of what is happening behind those numbers in each submarket as well as the nation as a whole. For example, when you read about vacancy decreasing, you know that others in the market are risking adding new leased space to their business. The narrative in a report will discuss what industries are making these moves. If it’s yours, there may be information that is new to you in your business and may affect your own company’s decisions. When vacancy changes on a large enough scale to begin to change rents, the economy may be moving in a new direction. Keeping abreast of these nuances in the markets will keep you on your toes in your own industry.
Market reports show you what is happening in other industries. If your business’ success depends on another industry, you can watch for that industry to be mentioned in Commercial Real Estate reports. Or, the reports can can give you a competitive advantage and help point you toward a new industry before your competitors realize what is happening.
Market reports help you determine future spending on your real estate. Depending on your company, your real estate can be in the top 3 expense items for your company. You should plan and budget and make a point to review how your lease compares to the market. Market reports allow you to become proactive instead of reactive. The newspaper article you recently read on the economy and the market probably used one of our market reports for their data. Read it first from a market report!
Look at Market Reports with New Eyes
Now when your broker wants to send you a report – or better yet, you click on his blog and read them 🙂 – maybe you will be able to see past the mind-numbing numbers to see what’s going on at a macro level in the economy, what’s happening in other industries that may indirectly affect yours and help you to think about your future cost projections in your own business. For excerpts from our latest 3rd quarter market reports, read on. Then for the full reports, click on the report icons below.
Excerpt from Bay Area Office Report
“In the face of renewed economic uncertainty, many space users have reacted with caution—scaling back, postponing or even cancelling planned growth. But while this trend has played out locally as a backsliding warehouse sector and decreased R&D activity, it has had little impact on the region’s exploding tech market, which is what continues to drive activity in the region. Tech players are leading the region’s current office boom and the market is actually already surpassing the growth levels that were recorded at the beginning of the first tech boom in 1997. The overwhelming majority of both deal activity and occupancy growth has come along the Highway 101 corridor, where tech companies have traditionally clustered. That being said, while the region’s North and East Bay markets have experienced little benefit from this trend so far, both the East Bay I-80/880 Corridor and Marin County markets turned in exceptionally strong performances during the third quarter.”
Excerpt from Bay Area R&D Report
“Following a stellar performance over the first half of 2011 in which the marketplace absorbed over 3.2 million square feet of previously vacant R&D product, both deal and growth activity slowed considerably during the third quarter of 2011. The good news is that even with these challenges the market recorded nearly 96,000 square feet of occupancy growth. Year-to-date net absorption for R&D product now stands above 3.5 million square feet—the highest level recorded since 2007. The bad news is that total deal activity (gross absorption) dropped during the third quarter to just over 5.1 million square feet. While this quarter’s slowdown comes somewhat as a disappointment, we see it as being more a pause in the action than the beginning of any new trend. We track active tenant requirements for office and R&D space in the marketplace. Along the Highway 101 Corridor alone we are currently aware of just under 8.9 million square feet of potential requirements that could land as deals within the next 24 months.”