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Gap between commercial real estate asking and actual rate deepens

In 2009, commercial real estate saw a widening gap between what the landlord asks a tenant to pay and what the tenant actually pays.
In the office sector, the average asking rate declined just slightly from the level it maintained in 2007 while the average effective rate (or actual rate) plunged.
In its Year-End Real Estate Market Review, the Boise office of Colliers International reports landlords settled for a rate 11 percent lower than their asking rate in 2009, compared to a 2.4 percent difference in 2008 and a 1.8 percent difference in 2007.
“Asking rates in 2009 were generally given less credence by tenants than in years past,” the report notes.
The average office space in the Treasure Valley went for $15.25 per square foot in 2009.
In the industrial sector, asking rents are declining, but “not as rapidly as they should,” according to the report.
“There is still a significant gap between landlords’ and tenants’ value expectations,” it says. “Asking rates and actual deal/comp rates need to move closer together for momentum to build in the Treasure Valley.”
Retail asking rates, on the other hand, have dropped drastically from year-ago numbers. The year-end report in 2008 showed asking rates at $17.21, but by year-end 2009, they’d dropped to an average of $14.47.
Tenants will continue to have the upper hand in 2010, Colliers notes. More retailers will close their doors or file for bankruptcy this year as consumer spending stays low.
But the second half of this year may see an increase in leasing activity as tenants look for a 2011 economic rebound.
For a free copy of the review contact Dave Fernandez at (208) 472-2868 or go to www.colliersboise.com to download a digital copy.

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