Compass Commercial: News and Articles

Kemp addresses full house of risk managers in the banking business

In a presentation to about 50 Risk Managers involved in Central Oregon banking, Compass President Bruce Kemp presented the numbers and the trends for commercial real estate in the next few years.

(Bend, OR) — March 19,2008
Bruce Kemp told interested bankers what indications he and other brokers at Compass Commercial in Bend were seeing in the softening commercial market at a lunch presentation last Wednesday (March 19, 2008). Supported by absorption and vacancy rate overviews and trends Kemp made the case for a slow return to normalcy and called upon bankers to heal the broken trusts between them, brokers and clients.

Bend Bulletin reporter Jeff McDonald covered the event. The text of his article follows. -----

Commercial real estate in region will grow slowly, official says
http://www.bendbulletin.com/apps/pbcs.dll/article?AID=/20080320/BIZ01/803200398
By Jeff McDonald
 / The Bulletin
While the residential and commercial real estate sectors will see losses this year, buyers and tenants will see opportunities, the president of a Bend commercial real estate office said Wednesday.
Charting the course of Bend and Redmond’s residential and commercial markets from 1995 to the present day and beyond, Bruce Kemp, the president of Compass Commercial Real Estate Services, said the region’s real estate market won’t likely return soon to its 2005-2006 heyday.
“While before it was a great market for bankers, construction companies and real estate brokers, now it’s a great market for buyers and tenants,” Kemp told about 50 members of the local chapter of the Risk Management Association, comprised mostly of banking officials.
“The commercial side is still growing — it will just be at a slower pace the next couple of years.”
The commercial sector will not see “anywhere near as drastic” a slowdown as the residential sector, Kemp said.
Bend and Redmond had 11 months and 15 months, respectively, in housing inventory as of the end of February, according to Kemp’s presentation.
The commercial sector, which typically lags about nine to 12 months behind the residential sector, has reverted to 2002-03 numbers, which wasn’t a bad market, Kemp said.
“What comes up must come down,” he said. “There’s already major pain in the residential market and for the banks holding some of the loans.”
The industrial absorption rate, or the total amount of newly occupied space minus the space that has become vacant within the year, dropped in Bend from a high of 297,886 square feet in 2005 to 85,687 square feet in 2007, he said.
That still keeps the city in positive growth mode, but it takes its absorption rate below 2002 levels, when the city’s industrial sector absorbed 99,881 square feet of new industrial space, he said.
The “return to normalcy” is a positive sign for the banking industry, which looks for trends of future safe investments, said Thomas Bourdage, the vice president of West Coast Bank.
“We’re not in any crisis mode in the commercial market,” Bourdage said. “We’re not suddenly seeing an abundance of vacancies. We’re more normal now.”
Slowdown in absorption rates and higher vacancy rates have resulted in downward pressure on prices, Kemp said.
That could present opportunities for those who were shut out of the market during the boom years of 2005 and 2006, Kemp said.
Commercial land values in those years skyrocketed to between $12 and $16 per square foot in Bend and $5 and $9 in Redmond, compared with  $7 to $8 in Portland and $4.50 and $6.50 in Reno, Nev., Kemp said.
Bend’s market already has started correcting itself, dropping to between $10 and $12 per square foot to buy land, Kemp said.
“This will help our economic development people recruiting companies, who are looking at other places,” Kemp said. “If their employees cannot afford to live here, it doesn’t work.”
In Redmond, the growth of the Redmond Airport and new commercial centers north and south of downtown have made the city “hot” for commercial development, said Kemp, who is the real estate agent of record for the city of Redmond.
“Wal-Mart, Home Depot and Lowe’s would not have gone to Redmond without knowing the opportunities out there,” Kemp said. “They know the drive-by numbers and volume of business out there.”
Jeff McDonald can be  reached at 383-0323 or at jmcdonald@bendbulletin.com.
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>From bendbulletin.com - published daily in Bend, Oregon, by Western Communications, Inc. Copyright 2005.