Bakersfield’s commercial real estate world is in a bit of a quirky place, say the local leaders who market and develop space here.
The downturn in the oil industry has, once again, sapped the energy from an economy that never really bounced back from the Great Recession of the mid-2000s.
“The commercial real estate market has been somewhat subdued,” said Greg Bynum of Greg Bynum and Associates. “The oil price has been off its previous highs. Local businesses have been downsizing and watching their finances. The market’s stable but it's not growing a lot at this point.”
City of Bakersfield and County of Kern budgets are facing substantial deficits and have suffered from nearly a decade of stagnation and even attrition.
But commercial real estate leaders say they see reasons for optimism.
“I think the market’s healthy,” said Cushman & Wakefield principal Duane Keathley. “Tejon Ranch is expanding. Wonderful is expanding.”
Then he qualified things a bit.
“I wouldn’t use the word boom …,” he said.
Developers are taking cautious steps to launch new building and renovation projects, as long as they can land tenants.
Bass Pro Shops has promised to come to Bakersfield, finally.
Work is continuing on a plan to remake and re-open the East Hills Mall, though the developers have announced some delays.
Those behind the 260-acre Bakersfield Commons project at Brimhall and Coffee roads have announced they will begin construction in 2018 with a theater, hospital, 1,000 homes and a mix of small retail and light industrial.
And the Giumarra family is bringing online the first retail components of the Stockdale Centre project on the long-dormant field dirt at the corner of Stockdale Highway and Coffee Road.
Café Rio opened there this week and Sully’s Chevron, Jersey Mike’s Subs and Blaze Pizza aren’t far behind.
The pictures for office and industrial space are less rosy, impacted more than other sectors by the drastic drop in the price of oil three years ago that sapped energy and jobs out of one of Kern County’s most powerful economic movers.
“The oil boys have slowed things up – slowed expansion,” said Scott Underhill of Newmark Grubb ASU & Associates. “There isn’t a lot of construction.”
He said the office market is stable, though, holding steady with tenants taking up much of the current office space.
That, in itself, is a victory, said Jeff Andrew, who specializes in office space for Cushman & Wakefield.
He’s been marketing real estate in Bakersfield for 30 years, he said, and he’s seen the boom and bust cycle of the oil and gas industry several times over that tenure.
This time, he said, it looks like Bakersfield’s size and diversifying economy helped cushion the office market.
“It just didn’t hurt us as bad as it has in the past,” he said.
“When we had these slowdowns there were historically high vacancies,” he said.
That hasn’t happened, the two men said.
“We haven’t seen ‘for lease’ signs all over town with no prospects,” Underhill said. “At least we don’t have tons of vacancies lying around the city making it look bad.”
Oil companies have dropped space, Andrew said. But others took that space.
“We are seeing it trade up from oil to other users,” he said. “We’ve bottomed out in the office market.”
One of the saviors coming in, Andrew said, is the medical sector.
“Our biggest demand in the office market is in medical space,” he said.
Bakersfield has a shortage of doctors and the population is continuing to grow. Hospitals are strong. And they need space.
Keathley pointed to the Stockdale Centre project, which he and Andrew represent.
Right now, the general public is looking only at the retail shops. But Keathley said there are three office buildings planned on the southeast section of the mixed-use development.
Offices will be coming to the development as well. Andrew said the firm is currently marketing a 40,000 square foot office building and has filled half the space with small build-to-own spots for medical clients.
Bynum said that in addition to doctors and related businesses, hospitals are moving some of their inpatient services into off-campus, out-patient settings where the services can be delivered more cheaply.
And office construction is coming.
“We’re right on the cusp of starting a new building for Kern Health Systems,” in the Buck Owens Boulevard area, he said.
The building will be 112,000 square feet and break ground in the next 30 days.
“Bakersfield’s office market will continue to grow slowly,” Andrew said. “If oil goes up to $60 to $80 a barrel you’ll see some big office buildings (under construction).”
On the bright side, real estate pros say, small retail and apartment development is humming along, driven by population growth.
“The types of developments we’ve seen to date have been more related to neighborhood commercial and food,” Bynum said.
People do have to eat and sleep, after all.
“Right now we’re getting top of the market rents and anything that’s good is leased,” Underhill said.
Bynum said they are getting near to filling all the empty retail space in the former Costco shopping center on Buck Owens Boulevard.
Temblor Brewing, Rush Air Sports, a go-cart business and other retailers are making things work.
But the experts, and the retail market, are being cautious about the future, watching the trend toward online retailers like Amazon.
Underhill said Bakersfield will see new retail development.
But it will be executed carefully.
“If Bass Pro does indeed build I think you’ll see a smaller Bass Pro concept,” he said. “ The developer won’t be building a lot of (speculative) space. All retailers are taking it step-by-step. They’re being very careful.”
Overall, Keathley, Andrew, Bynum and Underhill grade the commercial market as healthy.
“I give it an A-minus,” Underhill said.
Bakersfield has certainly lived through the feast or famine cycle of the economic roller-coaster in the past.
But business here, Underwood said, has shown a trend toward an important moderating principal: restraint.
“Developers’ unalienable right is to overbuild – but that isn’t happening,” he said.
And that is hopeful.