Tuesday, April 05, 2005

Denver Office Vacancy 20%

Colorado has had pockets of weakness in its' real estate market for months. This report in the Denver Business Journal provides more details. "In metro Denver, the office vacancy rate has hovered around 20 percent for the past three years, while commercial sales prices continue to rise."

Industry professionals are getting worried. "Even a moderate rise in interest rates could cause a housing price correction that would affect home owners increasingly reliant on home appreciation as a source of wealth, local real estate expert Rick Pederson said."

"'I believe far too much money is going into residential real estate.'..what concerns him more are the number of borrowers who have taken out larger home mortgages, called "jumbo loans," on an interest-only basis."

"Pederson suggested real estate is overvalued, saying that high vacancy rates and simultaneous rising prices doesn't make sense."


At 1:28 PM, Blogger Canadian Capitalist said...

Some more real estate froth:

Ottawa real estate

Canadian Capitalist

At 4:36 PM, Blogger Ben Jones said...

Thank you Arbee..Ben

At 9:13 AM, Anonymous SFguy said...

Same thing in San Francisco. Office vacancies still near 20%, yet commercial bldgs are selling at highest prices ever---nearly double (per sq ft) from 2000 when vacancy rates were below 1%. The biggest local commercial RE titans (Shorensteins, for eg) are in selling mode. The buyers are mostly pension funds and REITs who are playing with Wall Street funny money.

REITs have been Wall St darlings during the past few years because they throw off decent dividends during a time of low-interest rates. As they have gotten more popular, they have attracted scads of $$. So they put the $$ to work buying up properties, driving prices higher. They appear to be price-insensitive. So savvy private players are selling, dumb public money is buying. The REITs don't care what price they pay because they 1) have 10-20 year horizons; and 2) they have to put their $$ to work. When their stock prices begin to tank (and they will), the commercial buying frenzy will end.

Apt market in SF is similar story. A double since 1999 while rents are lower and occupancy also lower---not to mention population loss and flat incomes.

At 2:06 PM, Blogger View from Silicon Valley said...

Even 20% is a deliberate under-statement. The Silicon Valley rate is reported at 22% but is easily 30% -35%. Just driving around, it becomes clear. See also:
http://www.viewfromsiliconvalley.com/id118.html &


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