Sunday, January 7, 2007

Office space vacancy tightens

I am against unsustainable runups in prices. Period. They always end, and they end badly. Unsustainably high housing prices drive OUT workers, and think what you want, but all economies need worker bees. Drive out worker bees, and your left with a Queen bee or two that wonders who's going to get things done. Additionally, Bend downtown lease prices have skyrocketed to the point that many Mom-and-Pop type stores are closing. Progress marches on, and I'm all for that, but it's changing Bend in a way that I personally don't really enjoy. I like quirky little shops, and restaurants, and even cranky store owners. It gives the place some personality. If I wanted sterile, impersonal shopping, I'd move to a big city.

But if there is a runup in prices that I can vaguely support, it's in "industrial" office space and it's demand-led. The Bulletin has a piece today, "Office space vacancy tightens" that details the price increases in commercial leases. David Evans & Assoc. is moving from a space they've occupied downtown (across from the library) for 20 years, to The Old Mill. The lease rate for their current space is being jacked up to $2.75/sf. Luckily they aren't abandoning this space on pure cost reasons: they actually need more room. This is a good thing. Professional services firms typically pay a living wage (which has become damn hard in Deschutes County in the past 5 years), unlike many of the restaurants, retail and knick-knack shops downtown.

My worry, is this: It's my own opinion that Bend is "high beta"; it goes up farther and faster than many other parts of the country on the upswing, and conversely gets ravaged when things go South economically.
(And I know: "Things are different this time". They always are. But actually this time they "might" be different. I'll admit that Bend is having a economic "renaissance" unlike any it's ever had... so things might actually might be different this time.)
And Bend housing has worked its high-beta magic on the way up, and I think that we'll get smacked on the way down, hard. Harder than most of the country. But a mitigating force will be "living wage" jobs, how many are there and will they survive. If they can survive the cost explosion that is pertebating throughout this area without a commensurate payroll cut, the housing bomb I see coming could actually be far less severe.

"Living Wage" jobs is what we need more of here. Not more retail clerk jobs, not more Mt Bachelor lift assistant jobs, not more housekeeping, low-level secretarial, waitress, or any other "leisure" type jobs that pay minimum wage. We need jobs that start at $50 - 60 - 70 thousand. Longtime residents will say that's just unrealistic. And I would agree... if median home prices were $170K. But they're around $400K. And in places where medians are $400K (Boston, Chicago, San Diego...) starting pay IS $75K. It has to be for people to survive. We've got San Diego prices, and Burns pay (well, close). Something's gotta give.

My question is this: Bend housing has had its run, and is now deflating. And it's going to be hard to say how far and how hard the fall will be. Is Bend commercial space Bends ultimate high-beta real estate? Is it about to bust more spectacularly than our housing bubble? Or is it in a demand-led boom that will survive despite poor economic conditions that may be brought on by a housing bust? David Evans office manager Jim Carnahan seem to thing the latter:

And then there's the pressure to expand - a need that Carnahan doesn't see subsiding, despite the slackening in the local housing market.

"Frankly, we haven't seen any real slowdown," Carnahan said. "It's more like we hear about a slowdown, but we're all busy."

What do you think?


Anonymous said...

Just wondering what place worth living (read as: offers similar lifestyle benefits as Bend) in the USA has $170K median home prices? I don't see that house prices in highly desirable to live places have correlation to average salaries.

Paul-doh! said...

"highly desirable" is highly subject to interpretation. One of my favorite places in the US is Columbia, MO. There is nothing of particular note to this town, except the Univ of Missouri, and good eating, bars, and a pretty extensive mountain bike & trail system. I'm not really sure what I like about the place... it has dreadful Winters and unbearably humid Summers, and it's largely flat. But were I to leave Bend, it'd be high on my list of places to go.

And housing is dead cheap there, and the University provides a high number of decent paying jobs. I'd say that pay is on par w/ Bend... but it costs probably less than half as much to live there, and I consider it "highly desirable".

Bend has just about hit my outside tolerance for "Value-to-Price" ratios. It certainly is a great place with many amenities, but the past 5 year runup in prices have made it far less of a "Value" in my mind, and the runup in prices is actually decreasing the amenities that made me move & stay here. I don't want to live in "Bend, Inc.", I like towns with something of a small-town feel. Bend is losing that fast. The fast decreasing Value/Price ratio may soon overcome the extremely high costs to moving (I HATE moving), and I may leave if things keep going like they have the past few years.

Anonymous said...

"I may leave if things keep going like they have the past few years"

Let us know how much money it would take to persuade you to move, and we'll start a fund raising campaign.

IHateToBurstYourBubble said...

Oh Man! Why you hate a brother like that?

Anonymous said...

I may leave if things keep going like they have the past few years"

Let us know how much money it would take to persuade you to move, and we'll start a fund raising campaign.

You can sign me up for a hundred bucks- I'm sick to death of Paul's big threat that he's going to move.

There Are Options said...

>>Just wondering what place worth living (read as: offers similar lifestyle benefits as Bend) in the USA has $170K median home prices?

In North Port, Florida, you can get a brand new house in a new subdivision for $139,500. Prices in that area have fallen like 40%. If you like golf, it has a number of golf courses in the city limits, as well as dozens of other courses nearby. As opposed to Bend, you can play year-round, in a t-shirt even.

There are 24 golf courses within a 2-hour drive of Bend, but 40 golf courses in the city of Naples alone, a 90-minute drive from North Port on a stoplight-free highway. There are over 1000 golf courses in Florida, more than 4 times more than in Oregon, many of them in Southwest Florida, and did I mention you can play year-round?

If you like fishing, you can use some of the money you'll save by buying a house in North Port rather than Bend by buying a boat. The city is laced with canals, so you can keep your boat in the water tied up right in your back yard berth and head up the Myakka River or out into the Gulf of Mexico without the need for a pickup or trailer. You can fly-fish for trout in the local rivers and estuaries, or try for warm-water fish like bass in the local lakes. If you prefer ocean fishing, you can steer your boat out of the harbor and into the Gulf of Mexico, where you'll find tarpon, grouper, amberjack and marlin. If you feel like jumping off the back of the boat and taking a winter swim in the sea, no problem - this January, air temperatures have been in the mid-80s and ocean temperatures are in the mid-70s, a water temperature that the lakes and rivers of Central Oregon never reach even in late July.

No skiing in North Port, but you can use the hundreds of thousands of dollars you'll save to fly from nearby Tampa International Airport direct to Colorado to play in the snow ($274 round-trip on United). The Denver flight from Redmond, on the other hand, was recently canceled.

Don't get me wrong. I love Bend and, as opposed to Paul, I don't plan to leave. My friends and family and job are here. But I moved here and bought my house before the crazy run-up in prices. If I were making the choice today, I just might head someplace like North Port - it sounds pretty nice.