Last Friday I was talking to one of my commercial real estate colleagues, Darrell Nevin, about the HoCo loco economy. In the past, whenever another broker asked a competitor about business the response was generally positive, no matter how bad things were.
That's no longer the case. Nowadays most commercial real estate brokers I speak with are brutally honest about how bad things are. Instead of presenting a false front and saying that everything is fine, they instead share tales of incredible deals that are being made both to retain tenants and to entice them to relocate.
Still, we are by nature an optimistic bunch and so we are always on the lookout for signs that the market is turning around. On Friday, Darrell shared with me one of those signs.
"The smaller tenants are beginning to make their moves."
Darrell's niche in commercial real estate is working with the smaller companies, those companies that occupy under 5,000 square feet of office space. While much attention is paid to larger HoCo tenants like SAIC, Intregal Systems and Martek Biosciences, the smaller tenants are a very large part of our loco economic picture. And while the average business in HoCo occupies somewhere around 3,500 square feet of office space, the Howard County Economic Development Authority does not track office absorption below 5,000 square feet.
According to Darrell, that's exactly where the action is right now. "I'll bet if you compiled the numbers under 5,000 square feet, you'd find there is over 100,000 square feet of positive net absorption of office space in Columbia."
That compares with a year to date negative absorption of 53,000 square feet in the market in general.
Darrell sees the smaller tenants beginning to make their moves in anticipation of an improving market, "They are acting now to lock in lower lease rates and expansion options."
He cautions that this trend is really just beginning and hasn't wholly taken root yet but he notes that he has already completed over 10,000 square feet of transactions in this size range this year and he has a few more deals teed up to close soon.
I've always said that commercial real estate transactions are a good leading indicator of the economy. When a company signs a lease for new space it will often take three months or more before the space is ready for them to occupy. The expansion deals we close today will translate into new jobs in the next quarter.
If Darrell is right, 2011 could be shaping up to be a good enough year to start lying about how busy we are again.
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