Friday, September 4, 2009

Reporter's Notebook

Paul Leonard can be reached at

In search of the elusive silver lining

It seems for every step the economy takes forward, the next day it takes two steps back. And today seems the perfect example of an economy walking backwards.

The national unemployment rate released today jumped to 9.7 percent – a 28 year high that only reinforces the buzz around the Internet water cooler about the prospect of an economic recovery, called either “jobless,” anemic, or even continental European.

And then there’s the commercial real estate market, the engine for much of Clark County’s growth over the last decade. First, to get a feeling for the mood on the national front, I’ll cite a senior analyst at Deutsche Bank, who called the distress coursing its way through the commercial real estate market as being only “between the first and the second inning” in Wednesday’s New York Times.

To take the pulse locally, one needs only drive past downtown Vancouver’s Al Angelo Building, which is filling up slowly – albeit at rates reportedly below the per-square-foot asking price. Last Monday, Met Life closed on 6,984 square feet of office space at the building, according to Brian Sullivan at Coldwell Banker Commercial, who helped broker the deal.

The vacancy rate for office space in Clark County stands at 20.92 percent for August, up from 20.48 percent last month and 19.96 percent in June, according to a report by Eric Fuller and Associates of Vancouver. That’s bad news for landlords, many of whom have loans coming due early next year from deals made at the start of the building boom in 2005-6.

So for all the gloom in today’s news, where’s the promised silver lining?

I asked the same question of Adam Roselli, associate broker at Eric Fuller and Associates and the author of this week’s commercial office space report. While acknowledging market weakness would continue through next year, Roselli hinted at glints of possible recovery on the horizon.

The first comes courtesy of our neighbors to the south. This year, the Oregon Legislature passed a $733 million tax hike that Roselli thinks could send even more businesses our way – helping to both put a lid on vacancy rates and generate more revenue for cash-strapped landlords. However, those tax hikes are the subject of a contentious ballot initiative fight and not yet a done deal.

Second, the dearth of commercial construction projects – while continuing to squeeze Southwest Washington builders – will help cap supply as the demand for office space recovers.

For now, Roselli says, we wait. I say, we’re long overdue for another step forward.