by Bill McBride on 7/21/2010 10:29:00 PM
Wednesday, July 21, 2010
Voit Real Estate released their Q2 quarterly reports today for CRE in Las Vegas, Phoenix, San Diego, Orange County and several other southwest cities.
These two graphs from the O.C. office report really tell a story ...
Click on graph for larger image in new window.
The first graph shows the vacancy rate and amount of new construction. Notice that new construction has fallen to almost zero this year, and the vacancy rate in Q2 was 18.34%, slightly above the Q1 rate of 18.21%.
Look back at the early '90s when the vacancy rate was at about the same level (in '93 and '94), there was very little building for the next three years even with the vacancy rate falling.
These is so much excess capacity that there is no need for new investment for some time.
The second graph shows the average full-service monthly lease rate per sq ft.
This is just asking rates, but it looks like rents are off about 25% to 30%, and are back to 1999 levels.
Party like it's 1999!
This is just one area, but something similar is happening in most cities around the country. This also shows up in the Architecture Billings Index that showed contraction again in June. Historically the billings index will turn up 6 to 9 months before an increase in non-residential structure investment - there is a long way to go!