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Commercial Real Estate: Lower construction costs fuel multisector activity

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Nearly a quarter of the way into 2010, most businesspeople are glad to leave 2009 behind.

This year is shaping up to be much more promising in local commercial real estate. While sectors each have their own trends, the principles that always have applied to the field still hold true.

Retail, office and industrial
On the retail side, the market is seeing activity – a different type of activity from 2007, but busy nonetheless. Much of the current retail activity is preparatory, as companies and retailers are capitalizing on low construction costs and making moves to prepare for a positive 2010.

This activity will mostly bear fruit in the second half of the year. Although there are vacancies to be filled in many of the smaller neighborhood-type retail centers, high quality, well-located Class A space is experiencing relatively low vacancy. When compared to cities like Kansas City, we are fortunate in the Ozarks.  

The office sector of the local market is experiencing an increased demand for small office space to meet the needs of small businesses and sole proprietors. The demand for large bulk office space is not experiencing the same activity, but there are opportunities in our market for quality office space of any size.

In the industrial sector, an increase in lease and sales activity that began in fourth-quarter 2009 is continuing.

Many companies that put projects on hold a year ago have begun to implement their plans. Although these companies may have revised their projects to fit the current market conditions, there is still need for industrial space, and we are seeing that demand reflected in the increased activity levels.

As retailers were seeing declining numbers in 2009, they reduced their inventories, and this had a big impact on the industrial sector. Now that retail numbers are seeing improvement and stabilizing, retailers are restocking their inventories, and the industrial sector has seen a positive impact.

Construction and lending
With construction costs the lowest that they have been in decades, companies in all sectors are capitalizing on the deep discounts and opportunities available. Projects that were put on hold in early 2009 are seeing significant cost decreases when implemented in 2010, allowing companies to get more product for less. In many cases, companies that have had to revisit their long-term strategies have scaled down their plans, bringing even greater savings due to smaller project size and lower construction costs.

Some of the activity comes from companies that are moving up their timelines to capture the savings offered by the current construction market, implementing projects that were slated to take shape several years down the line.

Overall, the construction market is helping businesses adapt their strategies to meet the current market conditions at a discounted rate.

Without lending, there would be no retail, office or industrial expansion. The lending environment, although difficult at times, is beginning to return to its standard principles. Qualified credit buyers and tenants are now able to attain financing with similar terms reminiscent of years past.

Based on historical perspectives and existing conditions, the outlook is positive for commercial real estate in the Ozarks. If we stick to industry principles, the marketplace will continue to stabilize.

Ryan Y. Murray, LEED-AP, is vice president at Springfield-based R.B. Murray Co. He may be reached at Jeff Hays, Ross Murray and David Murray contributed to this column.[[In-content Ad]]


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