The commercial real estate investor market in Sonoma County is still experiencing some difficulty securing acceptable financing – although it is improving. Loan-to-value used to be as high as 70-80% a few years ago, but now 60-65% is about the best one can expect. Therefore, investors need a lot more cash to make deals.
SBA financing has been the instrument of choice for owner/user acquisitions with rates in the 6-6.5% fixed rate and loan to value of 80-90%.
Rental rates remain in flux, as anxious owners looking to fill empty spaces are offering discounted rates, but usually for just short term leases.
I believe that the commercial market is beginning to see signs of improvement as financing eases up a bit and leasing activity increases. Office space inventory has moderated, with the higher end space being absorbed at a greater rate than class B- and below. Deepest discounts are being offered at the lower end of the spectrum. There are a few retail tenants poking around and the industrial segment continues to be the most robust. Tenants are heeding the call from brokers to position themselves now, often in nicer space at the same or reduced rental rates, for future growth.
-Joel Jaman, Partner