Negative absorbtion. I was speaking with our contractor the other day about the current state of the economy in our region. Our contractor does many of our small tenant improvement jobs and was wondering where the work was? I mentioned that we have "negative absorbtion" of office space in our area now which means there is more space coming on line then being leased, in other words the vacancy factor is going up for office space. Of course, being a layman, he thought this term was hilarious and mentions it to me now every time we speak. Bottom line is that there are very few tenants out leasing space and as leases expire many are not being renewed in addition to more and more sublease space coming available.
However, look at the opportunities available! Now is the time to lease. Now is the time to buy. Negative absorbtion means future positive cash flow. Just as real estate does not always appreciate every year, it also does not go down forever either. This is the third recession I've personally been through and know that in our area it is very possible to buy or lease now and very likely double one's money in the next 5-7 years. As real estate practitioners we need to focus on the positive and things have not been this positive for parties williing to take a small risk in quite some time. We may not see a market like this for another 10-15 years so tell your tenants and buyers to act now while everyone else is singing the blues!
David Losk of Losk Commercial Real Estate Inc. specializes in leasing, sales and property management of office, warehouse and retail buildings in the Marin and Sonoma County areas of the San Francisco/Oakland/San Jose region.
Witnessing negative AND positive absorbtion since 1983..........
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