The Sacramento Business Journal looks at the growing impact of Sacramento's sinking housing market:
Housing downturn will likely hit offices
Thinning brokerages threaten leases
Sacramento's commercial property owners, who have relied heavily on housing-related businesses the past six years, are starting to feel the heat now that the market has cooled. A national research report released by Grubb & Ellis last week indicates that almost a fifth of recent local leases are in housing-related service sectors such as real estate brokerages, mortgage and title companies. The report's authors predict the effect of a housing downturn will be modest nationally, but it has the potential to be more painful in high-growth markets such as Sacramento.
That pain may last awhile, too. One prominent local real estate broker predicts a two-year flattening of housing prices. Housing-related business made up 19 percent of leasing activity in Greater Sacramento between 2000 and the second quarter of this year, according to the survey. That puts Sacramento tied with Oakland as the nation's fifth-most housing-reliant market...
The report cites cases in Sacramento of 5,000-square-foot offices occupied by only two or three employees. The research found "as many as one-half of local mortgage companies wanting to downsize or close altogether."
"The housing market in Sacramento has been growing so fast for so long that housing-related leasing is a bigger slice of the pie," said Robert Bach, senior vice president of Grubb & Ellis in Chicago. The region's pain could be significant. "Nobody knows how far down the housing market is going to go," he said. "It looks like we're not going to get that soft landing in housing that everyone was hoping for..."
"In times like this, you have to work," said Jeff Tarbell, president of ATM Mortgage. His Sacramento office is down to 18 brokers from 23 a year ago. The veterans have stayed and the newer agents have moved on. He also owns a few buildings, and he's had a couple of small realty and mortgage company tenants that closed down in the past year. He expects to see more of that in the region. "I think there are a lot of companies where, when the lease expires, they are not going to renew," Tarbell said.