Commercial Real Estate Follows Residential Real Estate Yet Again
July 15th, 2009 categories: Personal Notes
The old saying goes… “Commercial Real Estate Follows Residential Real Estate.” This can, and has been interpreted in many different ways, and we will look at a few of these interpretations in this article as they relate to Sonoma County. 
One interpretation is that Commercial Real Estate only begins once residential occupants are in an area. This is not always true, but it is true that Businesses do need customers, and customers do live in houses. This is the same as saying commercial goes where the heads and beds are. The population numbers in Sonoma County California are considered to be very stable, a good sign for commercial owners.
Another interpretation is that commercial Real Estate tends to lag the residential market by anywhere from 18 months to 5 years. The length of the lag tends to vary by market, and this is the particular intepretation I am writing about today.
Isn’t a great area like Sonoma County immune to macroeconomic effects more than largely populated areas? NO!…why would it be? Currently the Residential Real Estate market in Sonoma County is pretty hot. Many homes and condos are selling for well above asking price…recently one home on Winston in Santa Rosa sold for 15.3% above asking, according to the BAREIS MLS information. That is a staggering figure…I could not find a higher number at the time of my writing this article. I have heard other rumors of deals that will close with premiums paid in excess of this amount, but none on record. Anyway…with all of this action in residential, what is going on in the world of Sonoma County Commercial Real Estate.
Lately I have been driving past a lot of For Lease and For Sale signs on all sorts of commercial properties. From office buildings, to anchor tenants, to strip centers, even vacancies on the always strong 100 Block of Petaluma Boulevard. How can this be?
Can it really be that bad? I suppose it can! With unemployment rates about 12%, high gas prices, state vouchers of IOUs instead of cash backed checks for tax refunds and other payments, cash is a little tight these days.
Another reason for the lag in Commercial Real Estate in Sonoma County is to look at who is buying. We are finding that many of our buyers are people who have been renting and are moving into a house…not necessarily adding the “heads” that add up to customers of commercial tenants. We are also finding a lot of buyers are current owners, hoping to purchase a property at a price that allows them to cash flow when acting as a landlord, again, not necessarily adding new residents.
The downward trend in Commercial Real Estate is a scary trend, one many had predicted. Maybe it is a self fulfilling prophecy, or maybe it is the trickle down effects of the residential housing bubble, or maybe it is the unemployment rates, or maybe it is….well, there are all sorts of possibilities. In any event, it is here, and in full swing.
Frequent your favorite local Businesses if you plan to do any shopping. Have a Staycation in Sonoma County as opposed to a vacation somewhere else, after all, people come to our county from all around the world, and we should take advantage of our location as much as we can. Let’s do our part to support each other as much as we can.
As the old saying goes…Commercial Real Estate Follows Residential Real Estate!..even in Sonoma County!
