Historical Market Charts 1989 - 2008

Since I gather huge amounts of data and statistics, much like many in the commercial real estate arena, I thought a summary of two of Richmond's longest running data collections would be useful. These two firms, Thalhimer and Harrison & Bates, have generally been collecting and publishing their data since around 1989. In years past, before the advent of the web, these firms published annual market reports and freely gave them to the various practioners of commercial real estate including their competition.

I collected these reports over the years and have summarized their findings since 1989, along with an average of their results. These are in the form of charts and can be found on my web site at www.mikelowryco.com/market-reports.html

These charts have been completed for Industrial, Flex, Downtown Office, Suburban Office and Retail properties and include vacancy rates, rentable area and net absorption on an annual basis. You will see that in many instances, their information is quite a bit different from each other. Much of this is due to which properties were being tracked by each firm prior to CoStar's entry into the Richmond market in 2005. As to the differences following CoStar, it is simply a matter as to their company's decisions as to which properties comprise their given market as both are currently using the statistics provided by CoStar.

With regard to retail properties, Grubb & Ellis|Harrison & Bates decided to drop statistical coverage of the market after 2003 excepting the vacancy rate. Accordingly, the average rentable area and net absorption, and Thalhimer's stats, track exactly in the following years.

If you review the downtown office market absorption history, you will note an ominous long term trend from approximately 150,000 square feet of net absorption annually to no net absorption. This would suggest to me that any leasing occurring in newer properties are as a result of a true lateral move of tenants from a lower class of space to a higher class. To the extent that there are firms growing and taking additional footage, there are equal amounts of space being abandoned due to downsizing, movement to the suburbs, or simply going out of business. You may think that this simply reflects current economic conditions, but, the last major commercial real estate collapse was during the early 1990's when the analysis begins so the comparisons are quite relevant.

Looking at the suburban office space charts, the change in data gathering from CoStar's involvement is quite dramatic in comparing the two firms rentable areas beginning in 2005. Again, this is due to Harrison & Bate's excluding owner occupied and government office space, whereas Thalhimer includes all. It is fascinating however, that even though their rentable areas are 24 million square feet different, their net absorption tracks nearly the same. How can it be? Owner occupied and government owned properties rarely see change in occupancy. Properties that are owned by third party investors, REITs and institutions, (typically referred to as "Speculative Properties"), see most of the action from tenants coming and going.

The Richmond area's fastest growing job category is health and education, and this has been the case for most of the past 20 years. Go to my employment charts showing this and the other major categories to see for yourself. Although CoStar tracks medical office buildings, it doesn't go far enough in providing statistics as to this employment category's impact on the Richmond area office market. Granted, not all of the health, and much less of the education jobs use office space. However, the vast majority of the finance, insurance and real estate; business and professional; information; and government employment categories do occupy office space, whether it is leased or owned. Yet, if you review these employment categories percentage growth over the past decade, most have actually been losing jobs. This being the case, the mostly positive office space absorption may be coming predominately from health and education job growth.

I'll spend some more time on this topic in a future post.

Sincerely,

Mike Lowry