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Commercial Buildings for sale – A shrinking market? How is that?

Published May 13, 2011 by Eric Hughes #

Construction of commercial buildings has decreased approximately 28% across the board for industrial, retail and office properties (as reported by Costar,Inc.).  This is especially true for speculative warehouse and office buildings for sale by a developer.  For the business owner looking to buy a warehouse building or office for his/her operations, this decrease may drive up pricing on existing buildings and reduce availability.  I have clients tell me quite often that in this economy there must be a glut of buildings for sale.  While that may be accurate in areas of the country with higher than average unemployment and/or a shrinking population, it is quite the opposite in booming cities like Houston, Austin, Dallas, Atlanta, Provo and Phoenix.

While a shortage of funds from lenders for speculative development is a nationwide issue, availability of buildings for sale fluctuates dramatically from city to city.   Lender rules for loan approval do not take into account the feasibility of project based on an individual city’s needs and inventory.  A bad economy by default forces a migration of people to other, more prosperous areas of the country looking for jobs.  This drives up demand in those areas and changes the commercial real estate picture.  Tie this surge in demand to a national policy of restrictive lending and you have a shortage of quality buildings for sale.

So, the volume of buildings for sale becomes a relative term and may not correspond to the nationwide economy, especially in a city like Houston, Texas.

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