Area Commercial Real Estate Out-Performing Rest of Valley

Written by Wayne Kress.  Published October 2013 in Kern Business Journal.

Bakersfield is the energy capital of the West, while also being a top ag producer.  We've been a leading economic performer in both California and the nation. 

We've recently seen these headlines: "Kern No. 1 in California for 10-Year Total Personal Income Growth," "Kern No. 1 in California 1-Year Job Growth," "Kern No. 2 in California on Milken's Best Performing Cities List," "Kern No. 2 California Metro Economic Recovery" and "Building Fuels Inland Boom-Bakersfield is Helping Lead California's Construction Sector Out of Slump."

It is no surprise that our commercial real estate market is quite active.

Commercial real esate includes industrial, office and retail.  The most active of these is industrial.  Since the beginning of 2011, "occupiers" have bought or leased 3.8 million square feet of building space, and vacancy declined from 11.2 percent to 3.8 percent.

 

This translates into about 1.4 million square feet of available space, a lot of it obsolete.  Indeed, finding existing space is a challenge, which has led to higher rents, a mini-boom of new construction, and higher land values.

Of the five "spec" buildlings so far in 2013, which total 229,700 square feet, four of them leased during construction and the fifth was 30 percent pre-leased.  Four more build-to-suit deals were done totaling 381,200 square feet that are no under construction.  And Ross Dress For Less also broke ground on an approximately 2-million-square-foot "fulfillment center" in Shafter-the 41st logistics center to locate within a 50-mile radius of Bakersfield.

The market for office space has also been active.  Vacancy peaked in 2009 at 12.5 percent and is now down to 6.7 percent, with some areas of town boasting near zero vacancy.  Medical space has been the most active, considering the construction of San Joaquin Hospital's 60,000-square-foot Cancer Center downtown and San Dimas Medical Group's new 25,000-square-foot ob/gyn facility in the southwest.

Another new arrival is a 28,000-square-foot Class A spec office building at 11200 River Run Boulevard that includes iMortgage as a 9,000-square-foot tenant.  Significant transactions over the last year include Chevron's lease of 60,000 square feet in the Stockdale Tower and acquisition of 72,000 square feet at 9500 Ming Ave., which was one of two buildings sold by Kern Schools Federal Credit Union.  Vintage Petroleum purchased 72,000 square feet, Kern School's other building.

Kern Schools purchased a site in the new Seven Oaks Business Park (at Buena Vista Boulevard and Bolthouse Drive) for a new 75,000-square-foot headquarters and Houchin Blood Bank built a new 42,000-square-foot headquarters in the same park at 11515 Bolthouse Drive.

An exciting new project soon to break ground is Stockdale Centre, a 275,000-square-foot office complex at Stockdale Highway and Coffee Road. 

Along with Bakersfield's overall economic performance, retail sales increased for seven straight quarters.  With a base of about 12.6 million square feet, vancancy is now down to 11.6 percent from a recession peak in 2009 of 14 percent, and rents have risen steadily. 

We are now in the next cycle of retail development.  While all of the Fresh & Easy neighborhood markets that sprung up during the recession are gone, as are the two locally owned Green Frog markets, several new Dollar General markets arrived, Hobby Lobby has leased a portion of the old Mervyn's shopping center on California Avenue, Freddy's Frozen Custard opened at 2649 Calloway Dr., and Wiki's Wine Dive and Grill opened at 11350 Ming Ave.

Home Goods has enjoyed good business at 5510 Stockdale Hwy., Smart & Final has upgraded and expanded, and five Wal-Mart neighborhood markets are planned.  BevMo! and Sprouts are two retailers coming soon.

Overall, our commercial real estate market has outperformed other valley cities, and we are poised for the next development cycle across disciplines.

Wayne Kress is the principal-director of Cushman & Wakefield Pacific Commercial Realty Advisors, in Bakersfield.