The S.I.R.E. Report

February 2007

Provided by Sheryl A. Smith, CCIM, CEO of Smith Real Estate Services

The national view tells us that real estate remains a “darling” of investors.  However, since real estate is a local business, here is a look at Sacramento specifically.

Sacramento Retail

• Street Retail had the highest average asking rent of $2.17psf/mo.
• Average Asking Sales Prices are flat as compared to Aug 2006, across all retail property types.
• About 51% of the listed retail properties are between 5,000-24,999 sf.
• 14^th lowest retail vacancy market (6.2%) in the USA in 2006.

• 5th highest average retail rent ($2.13 psf/mo) in USA, across all property types.

• Net absorption in 2006 14,000sf

 

Average Asking Price by retail building size

5,000-9,999sf  $265 psf (28.7% of available property listed)

10,000-24,999sf  $222 psf (22% of available property listed)

25,000-49,999sf  $199 psf (6.1% of available property listed)

Snapshot: Compared to last month, average rents are slightly up and asking prices are ever so slightly down.  Even though there is about 5% more product listed, there is still only about 1.3msf listed.  Now would be a great time to sell!  Call me today for a free investment analysis of your property.

Sacramento Industrial

• Flex/R&D had the highest average asking rent of $0.93psf/mo.

• Average Asking Sales Prices have gone up about 4.6% since Aug 2006, across all industrial property types.

• About 60.5% of the listed industrial properties are between 5,000-24,999 sf.

• Net absorption in 2006 1,001,000sf

 

Average Asking Price by industrial building size

5,000-9,999sf  $144 psf (26% of available property listed)

10,000-24,999sf $128 psf (34.5% of available property listed)

25,000-49,999sf $ 97 psf (9.4% of available property listed)

Snapshot: Compared to last month, average rents are down, asking prices up. There is about 5.8 msf of inventory listed, which is about 5% less than last month.

Sacramento Office

• Office buildings had the highest average asking rent of $1.82psf/mo.

• Average Asking Sales Prices have gone up about 1.5% since Aug 2006, across all office property types.

• About 70% of the listed office properties are between 0-9,999sf.

• Net absorption in 2006 804,000sf

 

Average Asking Price by office building size

0-5,000sf  $356 psf (45.7% of available property listed)

5,000-9,999sf  $287 psf (24.2% of available property listed)

10,000-24,999sf  $247 psf (20.1% of available property listed)

Snapshot: Compared to last month, average rents and asking prices are flat. There is about 4.6msf of inventory listed, which is down about 4.7%.

Sacramento Multi-Family

• Du/Tri/Fourplexes had the highest average asking sales price of $188,238 per unit.

• Average Asking Sales Prices are flat as compared to Aug 2006 prices, across all multi-family property types.

• About 66% of the listed multi-family properties are between 1-9 units.

 

Average Asking Price by unit mix

>5 units $189,061 per unit (51.6% of available property listed)

5-9 units $113,434 per unit (14.4% of available property listed)

10-19 units $104,240 per unit (9.2% of available property listed)

Snapshot: Compared to last month, average asking prices and inventories are both significantly down. Lots of inventory on the market…about 4.3msf.

Western Region Average Cap Rate

Office              6.9%

Industrial         7.3%

Retail              6.4%

Multi Family    5.4%

The S.I.R.E. Report is published monthly with results from the previous month.  Stay current on property in Sacramento.  Sign up to receive my posts by automatic email each month.

Sources: Loopnet Local Insights & the NAR Commercial Real Estate Outlook Reports 

     The goal of making an investment is to make money.  Often, the amount one makes comes from taking a hit or miss approach.  If that doesn’t work for you, consider these 6 steps to getting a higher return on your real estate investment.

 

1.     1.  Know your holding period< ?xml:namespace prefix ="" o />

Knowing the amount of time you plan to hold an investment property is an important consideration in determining what you will pay for a property.  You make your money going into an investment.  

 

Changes in the market and/or area could dramatically affect the value of your property.  For example, if you buy in a redevelopment area, you may plan to buy the property at a low price, renovate it an then lease it out for significant cash flow.  If you are among the first to renovate in the area, it may take you awhile to lease out the space. 

 

If your goal is to hold this property for 2 years and you are the only one in the block renovating, you may not realize a very dramatic return, even after you renovate.  However, if your holding period is 5 years and others are making significant improvements in the area, you would most likely see a dramatic increase in your property value.

 

2.    Choose the right agent/broker

There are four key factors to consider when making your selection: 

1. Specialty (retail, office, industrial, land, apartment);
2. Leasing agent/broker vs. Investment agent/broker;
3. Time to dedicate to your property;
4. Ongoing communication with you about your property.

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