Bakersfield’s industrial building market is still in recovery…and conditions are improving. But it is still tough-going. Oilfield service demand is strong, and some wholesale distribution has even shown up (see Caterpillar). Overall, our vacancy rate is about the same.
Total Building Market
This table shows our Total Market. Sales activity surged a little this quarter over 3Q10, by a factor of nearly three. Most of this was distressed sales, as lenders are moving away from their “extend and pretend” practice in dealing with troubled loans. Now, they are foreclosing. Our leasing market is more active in terms of transaction count, but overall space leased is one-third less. While the vacancy rate shows here to have increased, a truer sense of it results from removing the two largest vacancies from the market, both at Tejon Industrial Complex and totaling 1,090,000 sf. Without them, vacancy is 5.5%.
| 3Q09 | 3Q10 | 3Q11 | |||
| Sales | 31,337sf | 28,780 sf | 78,333sf | ||
| Leases | 64,254sf | 197,323 sf | 128,892sf | ||
| Total | 95,591sf | 226,103 sf | 207,225sf | ||
| Vacancy | 7.20% | 7.90% | 8.37% |
Leasing Market
This Table isolates our Leasing Market. While the decrease in square footage is a third less than last year, there have been more transactions. And average rent increased, but that’s top be expected, since the average square footage of each deal is only about half of 3Q10.
| 3Q09 | 3Q10 | 3Q11 | |||
| Leased sf | 64,254 sf | 197,323 sf | 128,892 sf | ||
| Number of Leases | 10 | 13 | 16 | ||
| Average sf Leased | 6,435 sf | 15,179 sf | 8,056 sf | ||
| Average Rental Rate | 78.5¢ /sf/mo | 40.1¢ /sf/mo | 59.3¢ /sf/mo |
Sales Market
This table isolates our Sales Market. Sales have also rebounded nicely, up 272% over last year…and the number of deals is up a little as well. But average pricing declined 33%, a testimonial to both larger deals and distressed sales.
| 3Q09 | 3Q10 | 3Q11 | |||
| Sold sf | 31,337 sf | 28,780 sf | 78,333 sf | ||
| Number of Sales | 5 | 5 | 7 | ||
| Average sf Sold | 6,267 sf | 5,756 sf | 11,190 sf | ||
| Average Sales Price | $89.03 /sf | $86.00 /sf | $59.19 /sf |
Supply v. Demand
Knowing the supply is but half the effort, and supply is pretty easy to track. All that must be done, after all, is to simply count up the vacant buildings. We do so across 13 size categories. Demand is more difficult to calculate, but we have developed a proprietary means of doing so. Our “Supply v. Demand” Charts compare Supply against Demand in each size category. Supply exceeds Demand? Buyer’s market. Supply less than Demand? Seller’s market. We know the state of this dynamic in each category, and we calculate it every week. Demand is increasing, andwe are currently in a Buyer’s market within 5 of the 13 categories (one fewer than last quarter), and we’re just marginally into a Seller’s market in 6 of the 13 (also same as last quarter). The other 2 are at equilibrium.
Careful!
These tables tell the fundamental story, as what I show here are the total numbers from the 12 building size categories we track. It would be a mistake to apply the average pricing from these tables to any one deal. Our “Broker’s Opinion of Value” (see our “Offers of Help” on the Home page) is our tailored estimation of current market value of any specific property. This helps us, for instance, in designing a marketing campaign for any property. We also consult our Supply v. Demand charts for the purpose of gaining a sensitivity to the degree of the leaning of our specified category toward the seller or the buyer. And then we weave throughout all of this the fact that every property owner is unique, possessing his/her own motivations. Our job as broker is to know about these motivations.
We Offer Help
With all of this, we are thus a sort of gateway to finding value. Call us to discuss your unique situation; allow us demonstrate our value to you!
We thank you for your support!
Golden Empire Industrial Team
| Wayne Kress, SIOR | Oscar Baltazar | Coby Vance |
| Lic 00834680 | Lic 01263421 | Lic 01449929 |
| 661.633.3819 | 661.633.3821 | 661.633.3807 |
| wayne.kress@cbre.com | oscar.baltazar@cbre.com | coby.vance@cbre.com |
November 15, 2011
Great article on the local market – I am saving and will forward to our Credit Department as they are always in need of a good pulse of the market. Thanks Wayne and Team.
November 15, 2011
Thank you for making this information available, Wayne. It’s illuminating.
Hi Wayne, Oscar and Coby – Thank you for sharing this information. He sure helps me to read the world locally! As you know I rely on your surveys when I appraise industrial properties. So thanks again for keeping me and my customers up to date. At this time of year, again I give great thanks for our relationship and that we can share market data that helps us keep track of this marketplace. Mike Burger
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