Edward Smith" />
published on July 16, 2020 - 2:50 PM
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Just as the economy appeared to be on the rebound from shutdowns and record unemployment, property owners now face a second wave of shelter-in-place orders.

The Business Journal last week hosted a Zoom call with various Fresno-area real estate brokers in commercial real estate sectors to get a sense of what is happening in their worlds. It was a follow up to a similar Zoom call conducted in April. Both videos are available for viewing on YouTube at https://www.youtube.com/user/tbjfresno. This is a condensed version of what will appear in full in the July 17 edition of The Business Journal.


The number of people meeting July rent obligations for apartments, duplexes and condominiums is “starting to show some cracks,” said Robin Kane, senior vice president with the Mogharebi Group, a multi-family residential brokerage. Landlords hadn’t seen the effects of Covid too much during April, May and June.

Occupancies are still high — at mid-90% — but the employment status of those occupants is questionable.

“A lot” of apartments are coming online, whether nearing completion or recently opened, Kane said. Previously, apartment construction had been low. Developers had been hoping for $1.40 a square foot in rent, and in a recent rent survey, certain areas, especially North Fresno, rents neared $1.35 per square foot, “which is a good thing,” said Kane.



Retail property owners are being “bombarded” with requests for rent relief, though that number is beginning to stabilize, said Michael Arfsten with Retail California in Fresno.

Landlords were collecting 40-60% of their normal rent roll in April. By July, that rate increased to 60-80%. Tenants may be getting two to three months of relief or having that period extended to the end of their lease term, said Arfsten.



Rents have stabilized for office spaces, but a lot of questions still exist about the future of the workplace, said Brandon Lamonica, vice president of Fortune Associates. Money from Paycheck Protection Program loans helped tenants stay current on rents. And most office space in the area was considered essential.

Office landlords have more tenant improvement requests than those in other industries, said Lamonica. The decision on whether landlords or tenants take on significant improvements is becoming a point of contention for long-term lease renewals.

Deals have slowed and the deals that are happening are smaller ones, for the most part, which is typical for a down cycle, said Lamonica. Smaller tenants are looking to downsize and big name tenants are signing on to short-term lease renewals to see where the market will be.



Industrial real estate has quickly become a preferred asset class, said Ethan Smith at Newmark Pearson Commercial.

The rise of online shopping during shelter-in-place has turned warehouse space from an afterthought into an investment position. Demand has far outpaced supply, said Smith, and difficulty in creating infill properties as well as delays in securing entitlements and permitting has slowed new construction.

Those holding industrial real estate properties are still collecting 97-98% of rent, with most relief being asked for by small manufacturers. That relief is being given, though with much scrutiny. Landlords are asking for forensic accounting before granting any sort of forbearance.



Ag land has entered a “perfect storm” of volatility, according to Sullivan Grosz with Pearson Realty.

The initial spike in demand for fresh fruit at the beginning of the pandemic has diminished. In a normal year, any drop-off in demand could be offset by exports. Growers have been unable to turn to foreign markets to make up for lost demand by restaurant and institutional buyers.

For almonds, projected production this week spiked at 18% higher than in 2019, said Grosz. In a normal year, this would be a good thing, but combined with other factors, it has meant downward pressure on prices.

Especially in western Fresno County, the cost to draw up water has made even cash crops such as almonds difficult to pencil out.



Just as things in the world of commercial finance were beginning to stabilize, new Covid infection numbers may threaten the possibility of any sense of normalcy.

The past eight to 10 weeks have been “choppy” in the world of commercial real estate financing, according to Matt Renney, principal at California Realty Capital.

Real estate values have been stabilized by a lack of new construction. Potential buyers may be tempted to take advantage of an uncertain market with below market rate offers. But Renney said there is no definitive evidence to justify taking whatever offer you can get.

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