Commercial

Image of officeWhen the recession hit, the rate in commercial office building vacancy increased to a very high percentage. Coming out of the recession, and in the most recent years, that percentage has decreased significantly. Commercial real estate is another indicator that gives into a regional economy’s health and activity. When the economy is in expansion and companies expect to do well, vacancy rates fall and rents rise. Conversely rents fall and vacancies increase when the economy is in a recession. Construction of commercial real estate can reflect that firms are planning for future growth (Source: UOP Index)







This graph shows the percent of office buildings in the Stockton and Modesto markets that are vacant in the given quarter. Vacancy rates in the Stockton and Modesto markets have fallen in each quarter since third quarter of 2013, reaching a vacancy rate of only 9.1% in the first quarter of 2016. This reflects the continued economic recovery in the commercial market (Source: UOP CBPR Index & Costar reports).

This graph shows the annual asking rental price per square foot for office buildings in the Stockton and Modesto markets. Unlike vacancy rates, rental rates have not steadily increased since 2013, although the overall trend has been increasing. Rental rates have increased by 5.5% since the fourth quarter of 2012. Rental rates are much more sensitive to changes in market conditions and economic outlook. Owners and management companies are more likely to decrease rent instead of allow a property to become vacant which might explain the temporary decreases in rental price while vacancy rates have not increased since 2013(Source: UOP CBPR Index & Costar reports).

This graph shows the annual asking rental price per square foot for retail buildings in the Stockton and Modesto markets. Unlike rental rates for office and industrial buildings, rental rates for retail buildings decreased between 2012 and 2015. When new residential developments are planned in cities, retail buildings are usually the type of commercial real estate built along with the residential units. The increase in the stock of retail buildings could be a contributing factor in the decrease in rental prices (Source: UOP CBPR Index & Costar reports). This graph shows the percent of retail buildings in the Stockton and Modesto markets that are vacant in the given quarter. Vacancy rates for retail buildings in the Stockton and Modesto markets remained the most constant out of the three building types reported in this section, although vacancy rates have been decreasing since 2012. The total decrease in vacancy rates since the first quarter of 2012 has been 1.5 percentage points (Source: UOP CBPR Index & Costar reports).