May. 27, 2008 at 1:57pm
Some interesting insights as well...
Sometimes I find it hard to keep up with the WSJ's daily bombardment of news content - after all, a man can only read so much on a lunch break! Seeing that today's issue has yet to arrive, I found myself reading last Wednesday's issue when I noticed a photo that looked awfully familiar:
Granted I wasn't that surprised to see a photo of Russell's building in the WSJ, but I was still very much excited to see Tacoma and one of our own home-grown companies receive some national attention.
The article, A City's Revitalization Comes to a Crossroads by Maura Webber Sadovi basically covers Russell's upcoming decision on where its future home will be. For the most part it is old news for most of us, but what I did find interesting were the statistics provided . Take a look at these:
|Avg. annual effective rent/s.f.||$17.86||16.63|
|Avg. annual effective rent/s.f.||$17.75||$16.88|
|Annual asking rent/s.f.||$4.32||$4.32|
|Median Home Resale Price||$265,000||$282,000|
I imagine these along with similar statistics are readily available if you're willing to look for them, but for me this provided some interesting insight into short-term trends since last year. All in all vacancies for all types of space have gone up except for office space, which it seems has gone down. The reduction in retail space makes sense considering the current state of the economy and the continuing decline in consumer spending.
As for the office space, the reduced supply has consequentially increased the rental cost per square foot. Oddly enough, this is good news for Tacoma (though how good I'm not really sure - I don't know what national trends are and whether or not we are ahead/on/behind the curve). If this trend continues, the rising rental rates will make speculative construction of class-A office space more financially viable and should result in some new construction.
The only problem is, we have a few other things working against us. For one, the parking requirement (is this horse dead yet?) means that to be competitive with nearby cities, the increased rental cost must not only outperform those of nearby cities, but must also compensate for the added cost of building parking. Another problem is Russell's move. If Russell leaves Tacoma, a huge amount of supply is dumped into the office space market and rental costs could be driven down. If Russell stays in Tacoma, this blow is softened by the fact that Russell will have added one or more new buildings to the downtown core. The third issue is of course the economy at large, which has gotten more bearish by the day. This means investors of all kinds are more likely to reduce their exposure and hang on to their piles of cash until things stabilize - especially investors in real estate and office construction.
So the real question is, will Tacoma do for office space what it has done for residential properties downtown? Are we going to see tax incentives and financial assistance for building new office space like we saw for building/buying new condos? Will Tacoma do what it can to compensate for weak economic conditions? I sure hope so, but I really don't know what to expect. So what's it going to be Tacoma? The ball is in your court!
comments  | posted under downtown, office space, russell, tacoma, wall street journalComments
by KevinFreitas on 5/28/2008 @ 6:59am
|If Tacoma decides to offer up incentives a) it should offer it to all businesses, big and small; and b) it should nurture relationships between different sized organizations so there's mutual benefits to both when deciding to locate here. A community can be strengthened if businesses first look next door to one another for services and goods before gazing further to another City/State/Country. Discounts should be given for going local on both sides of the big/small business fence. This would make sure resources that benefit both are available and incentives exist to urge those relationships forward.
Are those stats above for Tacoma specifically or national?
by Nick on 5/28/2008 @ 8:41am
|I agree - anything Tacoma does should benefit businesses of all sizes. After all, some of the most successful businesses that came out of or nearTacoma (namely Weyerhauser, Russell, Labor Ready, Columbia Bank) were all home-grown small businesses at one point.
We definitely need to focus on "fertilizing" our garden of businesses (eww I can't believe I just typed that!) rather than looking for transplants. That will come if we can prove the soil is good here, and the only way we can do that is by supporting our existing local businesses first.
But yes, those stats were specifically for Tacoma.
by Erik on 5/28/2008 @ 9:53am
|The city needs to take a hard look at downtown.|
As Morgan points out in the Tacoma Sun, there are still a slew of empty, not to mention vacant lots.
The greater "working downtown" Tacoma is probably operating at 35 percent at best. Other than the County City Building and the jail, Tacoma Avenue is more than half dead.
Tacoma needs a lot more of everything downtown.
by fredo on 5/28/2008 @ 10:38am
|According to the figures shown in the posting, Office occupancy for Tacoma (2008) is less than 11%. This would mean office vacancy is 89%. If these figures are correct, I would suggest that there is no need to build any more offices in Tacoma.|
by Nick on 5/28/2008 @ 11:19am
|@fredo That actually threw me off, especially considering how many businesses I hear about that try to locate to Tacoma but decide against it because of lack of available space. This might warrant some more investigation, because I imagine this may include not just class A, but other types of office space as well. I'm not really an expert, so take my blurbs for what they're worth ;-)|
by Nick on 5/28/2008 @ 11:24am
|Interesting - I found some stats from the same source the WSJ article cites, and this shows a vanancy rate of 7.44% (272,556 sq ft.) for Q4 2007. Perhaps it was a typo in the WSJ?
This is getting interesting - I'm going to poke around a little more @ lunch and post up what I find.
by Erik on 5/28/2008 @ 11:27am
|I found some stats from the same source the WSJ article cites, and this shows a vanancy rate of 7.44% (272,556 sq ft.) for Q4 2007. Perhaps it was a typo in the WSJ? |
The occupancy rates being reported have always been puzzling.
For Class A, it was supposed to be less than a percentage some time ago. I guess empty buildings simply do not get into the equation at all.
by Jake on 5/28/2008 @ 11:29am
|I think it is saying office occupancy is up 10.3% over the previous year, which would be good.
Retail vacancy is up 5.3% over the last year which is not good.
by fredo on 5/28/2008 @ 11:30am
|Nick-As you suggest, they probably mean vacancy rate and not occupancy rate, especially since all the other categories mentioned were for vacancies, and not occupancies. Thanks for clearing this up.|
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