No Vacancy or Know Vacancy?
Vacancy is the most quoted indicator about the health of the commercial real estate market. Every broker recites percentage of vacancy as the statistic to describe market conditions. We track vacancy, too, and take it very seriously. But we track vacancy of buildings our clients want – specifically Class A and Class B non-owner-occupied buildings. Why is this important? The reasons are many, but here are two critical ones.
First, building owners and their agents like it when vacancy rates are lower. In their minds, low vacancy equals low supply. Low supply means higher rates. If an owner’s agent can make you believe that supply is low, they believe they can justify higher rates per square foot. The most widely subscribed to indexes track vacancy among Class A, B and C buildings and owner-occupied buildings. Therefore, the Sprint Campus (4 million sf) and the Black & Veatch headquarters (500,000 sf) in Kansas City, for example, get factored into the numbers as 4.5 million square feet at 100% occupancy. This artificially drives the vacancy down favoring owners’ story. Given that we track only Class A and Class B, non-owner-occupied buildings, our vacancy study more accurately reflects true vacancy of the buildings our clients will be attracted to. Today, our vacancy analysis for the Kansas City metro area shows a 9% higher vacancy than the most widely subscribed to index (22% vs. 13%). We use this fact to our clients’ advantage.
Secondly, if your firm needs 25,000 square feet of space, the most important numbers to know are about vacancy for spaces 25,000 square feet or larger. If the market is 25% vacant, but there are few 25,000 square foot spaces to choose from, the vacancy rate doesn’t help you much.
To best advise our clients, we keep our own proprietary database so we know vacancy. This is just another way we’re your partner, rather than a vendor, and how we prove that tenants matter.
Please call us to schedule a no-obligation meeting to discuss your space needs now.