Written by The Business Journal Staff
“In the last four years, we’ve seen that vacancy rate drop considerably,” said Brian Decker, president of the Fresno office for real estate company Colliers International.
“We’ve seen the highest number [office] of spaces filled in 10 years,” Decker added.
Colliers officials were confident 2016 would be a strong year based on an upswing in office space absorption for the prior three years, according to the report.
“That prediction proved true and then some, as 2016 turned out to be a very memorable year,” the report continues, citing that as of January of this year, the overall office vacancy rate in the Fresno-Clovis metro area was 11.4 percent, down from 12.8 percent a year earlier.
“The national average is about 12.25 percent vacancy, so we are outperforming the national average,” Decker said.
Those statistics don’t include retail and warehouse spaces or office space in government-owned buildings.
What the January figures mean is that out of the 21.33 million square feet of office space in the metro area, 2.43 million was available for purchase or lease at the start of the year.
Among the more notable sales and leases of office space last year was the city of Fresno leasing 10,000 square feet of the Manchester Center mall to convert into a police substation and the sale of four of the six buildings in north Fresno’s North Pointe Center — 52,649 square feet of office space and 24,844 square feet of retail space — in September 2016.
As for what’s pushing the upswing, the report cites post-recession optimism among tenants and buyers as a major factor.
“People believe they can go out and make a living for themselves,” said Rich Lucido, co-owner of Lucido Properties in Fresno, which owns and manages small office and retail spaces.
“There is a very strong sense that they can go out and start something at this time.”
The Colliers report also cites low interest rates as helping propel office space purchases, while Lucido noted that many operators of home-based businesses have gained enough confidence in the local economy that they’ve opted to move their operations into commercial spaces.
As such, he said, “On the small-business level, we have seen strong demand within Fresno and Clovis,” with some vacant spaces being leased within 30 to 60 days, about half the time it took two or three years ago.
The Colliers report divides the Fresno-Clovis metro area into eight sections — or “submarkets” — and shows the vacancy rates for each. The lowest was in the West Herndon/Palm Bluffs submarket, with 8.47 percent, followed by the Northeast/Clovis, Airport/Southeast Central and Central Fresno submarkets, each with vacancy rates of more than 9 percent.
Topping the list with the highest vacancy rates were the East Shaw submarket at 13.16 percent and Downtown Fresno at 13.31 percent — the only two submarkets in the metro area that saw vacancy rates rise over the past year.
But the news isn’t necessarily bad, at least in Fresno’s downtown area.
“We have a lot of investors and a lot of new businesses that are looking to come to downtown,” said Aaron Blair, president and chief executive officer of the Downtown Fresno Partnership, a partnership between public-sector and private-sector interests working to improve the city’s downtown area.
Earlier this year, the group put out its first-ever formal report of downtown development, citing that through last year construction projects valued at an estimated $64.3 million had been completed or started downtown, and another $235.9 million in public- and private-sector projects are underway or slated to start later this year.
“What we’ve been seeing is a trend of office users going back to downtown,” after many left in the ‘80s and ‘90s to follow retail trade out of the area or locating closer to suburban areas, Blair said.
“The younger workforce — people in their 20s and 30s — are looking for a more urban environment,” he explained, adding that the trend here parallels a national trend of office users heading back to downtown districts.
Older downtown buildings are also seeing some rehab work. Fresno developer Ed Kashian recently began exterior improvements on the 105-year-old Rowell Building that he purchased in 2014.
He intends to lease it for office space, and has been negotiating with Fresno County on the space.
Downtown also has seen a rise in residential development over the past eight to 10 years.
“People are drawn to the walkability of downtown and the mixed uses,” he said. “They want to work and live in an area that allows them to walk freely to restaurants, or a baseball game or a brewery.”
The partnership reports that 109 residential units were completed or under construction last year, and another 314 are in various stages of planning this year.
One downside of the low office vacancy rate in the Fresno-Clovis metro area is that it’s getting harder to find available spaces, Lucido said.
“I can tell you that premium locations have certainly gone, and finding what you want and where you want it is becoming increasingly difficult,” he said.
As such, he suggested that potential buyers or lessees of office space should temper their expectations of finding a perfect place, and they should begin their searches earlier than planned to improve their chances.