When we were finishing up 2014 and predicting 2015, we were still talking about the recession. We were happy to report that the recessionary times surely seemed well in our rearview mirrors with brighter times ahead. That has proven to be the case, with record low interest rates prevailing throughout 2016. After a downturn blip in the first quarter of 2016, we had solid, steady growth in the equities markets pretty much all year long and a very strong finish-line sprint to end the year. Business recovery and growth is slow but steady.
In the biggest news of the year, the country sent a very strong message to Washington, DC, this past November, in the form of a vote against continuing to go forward with any of the status quo policies and leadership. Now we stand on the brink of one of the biggest political experiments in history with top business leaders rolling up their sleeves with new and novel ideas of how to run the country. With any luck, this will turn out to be better solution than what lifelong bureaucratic politicians have achieved. The hope is that bringing proven business savvy and an inherent business background of tight fiscal responsibility and control will translate into a more efficient, effective governance of our nation. Time will tell, but the division between the political stances of the conservatives and liberals in the USA will not be healed anytime soon.
In the Truckee Meadows and I-80 East corridor, despite the very busy year for adding significant new, large Class A warehouse space the demand has outpaced supply and we have less vacant space today than the same time last year. Currently, the ratio between the amount of available space and the absorption of the vacant space is still in balance, with the needle is starting to leaning a bit towards the ‘tight’ market side. With the long lead time required to develop new warehouse space, we could reach times in 2017 when availability of new, state of the art Class A space gets tight. Especially if several of the larger tenant prospects looking at the area all commit to space within the same quarter.
Generally we are experiencing rising rental rates in the smaller flex spaces and steady pricing in the Class A big box spaces. Even if the Class A market tightens some in 2017, we do not anticipate any price increases as developers will continue to compete for tenants to fill their vacant spaces. Construction should remain active throughout the year and the area will remain attractive for the placement of investment funding.
When we look back at 2016, we are expecting more of the same in 2017. Then, as we approach 2018, we will try to predict how close to the end of the current real estate expansion phase we might be.
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