Debbie Martin

You may be surprised to hear the commercial real estate market was very active in 2010, resulting in many successful lease transactions as well as closed sales. The consensus among commercial agents is that the main factor that drove activity in the industry was price point.

Activity is up across the board, but of course some commercial sectors are seeing more activity than others.

The majority of the commercial transactions for 2010 were leases. Almost all leasing activity took place in second generation space. This was due to tenants looking for those “amazing” lease rates, and “amazing” lease rates typically only work in existing built-out space where a landlord doesn’t have to spend much – if any – on tenant improvements.

However, with these lease rates come shorter lease terms, as landlords know the market is coming back and rates will definitely increase in the near future, so they are not willing to lock in for a long term.

Although leasing has seen the most activity, there has been some great activity in owner-user sales. The same holds true for buyers as lessees; they are looking for the most value for their money, which certainly means buying an existing building over building a new building from the ground up.

At the end of the fourth quarter, both vacancy rates and average asking rates varied widely by submarket. The majority of office activity has been in the Eagle Road-Meridian area. This trend is due to growth in that area and easy I-84 freeway access.

Vacancy rates in the retail sector are high but are skewed due to vacant big box retail space that is 20,000 square feet or larger. Retail vacancy has also jumped due to video stores like Blockbuster and Hollywood Video going out of business.

The industrial sector is seeing activity, but the average lease transaction is taking about three months. A significant amount of activity is in the owner-user category looking for single tenant buildings ranging from 5,000 to 10,000 square feet. Leasing activity will continue to improve as tenants take advantage of the market, concessions, and lower rates.

The investment market has probably been hit the hardest. We tell our clients if you don’t have to sell, don’t. But if you do have to, then price it to sell. There are buyers in the market with money looking to buy; but, once again, the buyers are looking for deals so the product that moves is priced to move.

With such great activity in the commercial market during 2010, we feel optimistic that 2011 is going to be a continuation of the activity we saw during the past year.

Building permits are increasing in the Boise area. In the latest “Idaho Economic Indicator,” building permits in Ada County in the third quarter were up over 3 percent in 2010 compared to 2009.

As the completion of the Ten Mile Interchange nears, larger to medium-sized box retailers are focusing their sights on the interchange.

SBA loans were up in 2010, and that trend is expected to continue in 2011. The SBA 504 program is such a great financing tool for owner-occupied buildings. It is very attractive to buyers as they only have to come up with 10 percent down – or less in some instances.

SBA finances 40 percent at a fixed rate for 20 years, which this month was 5.74 percent. There are many factors that come into play for banks to determine their interest rates, but it’s in the range of 4.5-6.5 percent fixed for three to five years. They will finance 50 percent of the loan.

This year has started out strong. It seems clients are more confident of the future and are ready to get in the game rather than sitting on the sidelines to “wait and see.” And that is a wonderful change.

This column was written by Debbie Martin, principal and broker at DK Commercial in Meridian.