The downturn in oil hit Bakersfield’s general office market hard as 2015 drew to a close, according to a new report.
The fourth quarter update says locally operating oil companies shrank so much in the final three months of last year, the most recent period for which numbers are available, that the city’s office vacancy rate jumped a full percentage point, to 8.34 percent.
That increase in vacancies, representing about 100,000 square feet of newly empty space citywide, was considerably sharper than the local office market experienced during the preceding nine months, when Bakersfield’s overall vacancy rate rose by only a quarter of a percentage point.
The brokerage putting out the report, Cushman & Wakefield Pacific Commercial Realty Advisors, attributed the fourth quarter vacancy rate increase to oil producers pulling out of the city’s most highly prized offices, known as Class A space, which makes up about 38 percent of Bakersfield’s overall, 8.5 million-square-foot general office market.
“Contributing significantly was the shedding of excess Class A space by major oil as they looked to downsizing measures in an effort to maintain stockholder dividends in the wake of spiraling worldwide crude oil price drops,” Cushman & Wakefield wrote.
One particular building in the submarket around California Avenue lost a single tenant accounting for 60,000 square feet of rentable office space. The report, which didn’t identify the building or the tenant, said the “California Corridor” submarket had a vacancy rate of 23 percent in the fourth quarter.
Bakersfield’s average office rental rate declined 4.8 percent to $1.57 per square foot in the fourth quarter, Cushman & Wakefield reported. It noted vacancies in medical office space, which is not considered part of the general office market, rose from 9.2 percent to 10 percent.
The report is but the latest sign sharply lower oil prices since mid-2014 are weakening Bakersfield’s real estate market.
At a January real estate conference, local commercial and industrial space brokers forecast continued softening in rental and sale prices because of petroleum’s downturn.
A local executive with Colliers International told conference attendees vacancies in Bakersfield’s strongest local office market, the area around Cal State Bakersfield, will double or triple during the next few years because of the area’s dependence on the oil industry.